The Asst. Commissioner of Income tax , Panaji V. NOSHIRE DARA MODI,

ITA 62/PAN/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4311 (ITAT-PANAJI)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 26-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIT RAJ SINGH
• Keywords: Business income; Depreciation; Difference of opinion; Corroborative evidences; Commercial expediency; Capital expenditure
• Section: 143(3); 133(6); 37(1); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 62/PNJ/2013 : (ASST. YEAR : 2008 - 09) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), PANAJI, GOA (APPELLANT) VS. NOSHIRE DARA MODY FRENDRA SALMONA WADDO, SALIGAO, BARDEZ - GOA PAN : AJTPM8205D (RESPONDENT) CO NO. 8/PNJ/2013 ( IN ITA NO. 62/PNJ/2013 ) : (ASST. YEAR : 2008 - 09) NOSHIRE DARA MODY FRENDRA SALMONA WADDO, SALIGAO, BARDEZ - GOA (CROSS OBJECTOR) PAN : AJTPM8205D VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), PANAJI, GOA (RESPONDENT) ITA NO. 6 4 /PNJ/2013 : (ASST. YEAR : 2008 - 09) NOSHIRE DARA MODY SALMONA WADDO, SALIGAO, BARDEZ - GOA PAN : AJTPM8205D ( APPELLANT ) VS. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 2, PANAJI, GOA. (RESPONDENT) REVENUE BY : AMRIT RAJ SINGH, DR ASSESSEE BY : RAHUL KHARE, ADV. DATE OF HEARING : 15 / 05 /2013 DATE OF PRONOUNCEMENT : 05 / 0 7 /2013 O R D E R PER P.K. BANSAL : 1. BOTH THE APPEALS AND CROSS OBJECTION HAS BEEN FILED AGAINST THE ORDER OF CIT(A) DT. 19.2.2013. THE ASSESSEE IN HIS APPEAL HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 2 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) 1. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW CONFIRMING THE ADDITION OF RS.1 9 ,10,000 ON ACCOUNT OF COMMISSION, WHICH IS NOT ONLY BAD IN LAW BUT ALSO AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW CONFIRMING THE ADDITION OF RS.62,500 ON ACCOUNT OF FOREIGN TRAVEL, WHICH IS NOT ONLY BAD IN LAW BUT ALSO AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. THE REVENUE IN ITS APPEAL HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1. THE LD CIT(A) HAS ERRED IN ALLOWING COMMISSION PAID TO VARIOUS PARTIES AMOUNTING TO RS.91,41,000/ - OUT OF ADDITION MADE OF RS.1,20,51,000/ - UNDER THE HEAD PAYMENT TO COMMISSION. 2. THE LD CIT(A) ERRED IN PARTLY ALLOWING EXPENDITURE ON FOREIGN TRAVEL OF RS.62,500/ - IGNORING TO PROVE THAT IT IS FULLY RELATED TO BUSINESS PURPOSE. 3. THE LD CIT(A) ERRED IN ALLOWING DEPRECIATION @ 80% ON CAR AS AGAINST 50% ALLOWED BY THE AO UNDER THE DEPRECIATION. THE ASSESSEE IN ITS CROSS OBJECTION HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ADDITION OF RS.15,00,000/ - WHICH IS BAD IN LAW AND ON FACTS. 2. SINCE THE GROUND TAKEN IN THE CROSS OBJECTION HAS BEEN WITHDRAWN BY THE COUNSEL OF THE ASSESSEE DURING THE COURSE OF HEARING, THEREFORE, THE C.O STANDS DISMISSED AS WITHDRAWN. 3. NOW, THERE REMAINS ONLY THE APPEAL OF THE REVENUE AS WELL AS THE APPEAL OF T HE ASSESSEEE FOR ADJUDICATION. 4. GROUND NO. 1 IN ASSESSEES APPEAL AS WELL AS GROUND NO. 1 IN REVENUES APPEAL RELATE TO THE COMMON ISSUE RELATING TO DEDUCTION IN RESPECT OF COMMISSION CLAIMED BY THE ASSESSEE. THE BRIEF FACTS OF THE CASE ARE THAT THE 3 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) AS SESSEE FILED RETURN OF INCOME AT RS.4,67,13,197/ - . THE AO FRAMED ASSESSMENT U/S 143(3) ON INCOME OF RS.6,11,84,387/ - BY MAKING CERTAIN ADDITIONS AND DISALLOWANCES. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AND CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. THE AO DURING THE COURSE OF ASSESSMENT NOTED THAT THE ASSESSEE PAID COMMISSION TO VARIOUS PARTIES AMOUNTING TO RS.1,2 5 , 51 ,000/ - AND ACCORDINGLY HE ISSUED NOTICE TO THE ASSESSEE. THE AO DISALLOWED COMMISSION TO THE EXTENT OF RS.1,20,77,000/ - . T HE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AND CIT(A) ALLOWED THE COMMISSION TO THE EXTENT OF RS.91,41,000/ - AS PER THE OBSERVATION GIVEN UNDER PARA 7.1 TO 7.3.6 OF HIS ORDER AND CONFIRMED THE COMMISSION TO THE EXTENT OF RS. 19,10,000/ - . THE REVENUE HAS COME IN APPEAL AGAINST THE DELETION OF THE DISALLOWANCE OF THE COMMISSION TO THE EXTENT OF RS.91,41,000/ - WHILE THE ASSESSEE HAS COME IN APPEAL AGAINST SUSTENANCE OF ADDITION OF RS.19,10,000/ - . 4.1 THE LD. AR BEFORE US CONTENDED THAT THE ASSESSEE IS OVER 70 YEARS OF AGE AND THE BUSINESS INCOME IS FROM DEALING IN REAL ESTATE FOR THE LAST 5 YEARS. THE INCOME IN A.Y 2004 - 05 WAS RS.7,45,000/ - WHILE DURING A.Y. 2008 - 09 IT WAS RS.4.67 CRORES. THE ASSESSEE HAS EARNED THE COMMISSION AND HAS ALSO TO PAY THE COMMISSION ON SALE AND PURCHASE OF THE PROPERTIES. THE GROSS RECEIPT IS RS.10.88 CRORES AGAINST PAYMENT OF COMMISSION OF RS.1.205 CRORES. THE AO ONLY ALLOWED THE COMMISSION OF RS.4.74 LACS AND DISALLOWED THE SUM OF RS.1,20,77,000/ - . THE REASON FOR T HE DISALLOWANCE WAS THAT THE ASSESSEE WAS UNABLE TO PROVE THE PAYMENT MADE AS COMMISSION WAS FOR THE PURPOSE OF THE BUSINESS AND SOME PAYMENTS MADE ARE FRAUDULENT AND UNLAWFUL IN NATURE AND THERE IS NO BUSINESS PURPOSE. IT WAS POINTED OUT THAT IN THE PREC EDING 5 YEARS THERE WERE TRANSACTIONS OF PURCHASE AND SALE AND COMMISSION PAID AS DETAILED BELOW : 4 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) ASST YEAR TOTAL TRANSACTION (PURCHASE + SALE) COMMISSION PAID 2004 - 05 00.40 CR. 8,90,000.00 2005 - 06 01.44 CR 2,08,000.00 2006 - 07 02.71 CR 15,82,240.00 2008 - 09 15.30 CR 1,20,77,000.00 IN APPEAL 2009 - 10 13.61 9,50,000 ASSESSMENT COMPLETED, NO DISALLOWANCE MADE. 4. 1.1 DURING THE A.Y 2004 - 05 TO 2006 - 07 AND 2009 - 10 NO DISALLOWANCE WAS MADE. IT WAS STATED THAT IT IS A WELL - ESTABLISHED PRACTICE THAT ON EVERY SALE AND PURCHASE, COMMISSION OR PROFESSIONAL CHARGES ARE PAID. ON THE TRANSACTION OF RS.15.31 CRORES, THE ASSESSEE PAID MERELY A COMMISSION OF RS.1,20,77,000/ - . THIS INCLUDES NOT ONLY THE COMMISSION BUT ALSO PROFESSIONAL SERVICES RENDERED BY EACH ENTITY TOWARDS NEGOTIATING THE TERMS AND CONDITIONS OF THE DEAL AND ALSO BEING INVOLVED IN FINALIZATION OF CONSIDERATION A ND TRANSACTION. IT WAS POINTED OUT THAT THE COMMISSION OF RS.1,20,77,000/ - WAS MADE TO VARIOUS ENTITIES AND THEREFORE IN RESPECT OF EACH OF THE ENTITIES THE SUBMISSIONS WERE MADE SEPARATELY AS UNDER : I) FOR THE COMMISSION PAID TO M/S. DIGITAL FUTURE INDIA PVT. LTD. AMOUNTING TO RS.40 LACS, IT WAS SUBMITTED THAT THIS COMMISSION WAS PAID ON ACCOUNT OF FOLLOWING SALES TRANSACTION : 01 DAVINDER SINGH DOGRA PROPERTY SITUATED AT NERUL HILL 2,20,00,000 02 M/S A.K.G ENGINEERS PROPERTY SITUATED AT CARMULIM BARDEZ 30,00,000 03 M/S R.K. PURI (HUF) PROPERTY SITUATED AT CARMULIM BARDEZ 30,00,000 04 SH ALDRIN PROPERTY SITUATED AT UCASSAIM BARDEZ 1,41,75,000 THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ISSUED NOTICE U/S 131 TO THE SAID PARTIES DT. 15.11.2010 ASKING TO CONFIRM THE RECEIPT OF THE 5 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) COMMISSION. IN RESPONSE THERETO, M/S. DIGITAL FUTURE INDIA PVT. LTD. NOT ONLY CONFIRMED THE RECEIPT OF THE AMOUNT OF RS. 40 LACS LESS TDS VIDE THEIR LETTER DT. 29.11.2010 BUT ALSO SUBMITTED THE PROOF OF FILING INCOME TAX RETURN, STATEMENT OF BANK ACCOUNT FOR HIS PERUSAL. IN THIS REGARD, ATTENTION WAS DRAWN TO ANNEXURE B AND B1 OF THE PAPER BOOK. THE ASSESSEE HAS ALSO DEDUCTED TDS. THE COMMISSION PAID COMES EVEN LESS THAN 10% OF THE GROSS SALES. IT H AS A DIRECT NEXUS WITH THE SALES. ALL THE COMMISSION HAS BEEN PAID THROUGH CHEQUES. THIS HAS BEEN INCURRED FOR THE PURPOSE OF THE BUSINESS AS COMMERCIAL EXPEDIENCY REQUIRES SUCH EXPENDITURE TO BE INCURRED. THE AO MERELY DISALLOWED THE SAME ON THE BASIS THAT THESE PARTIES DID NOT FILE DETAILS REGARDING SERVICES RENDERED ALONGWITH SUPPORTING EVIDENCE IN THE FORM OF CONTRACT, AGREEMENT, WRITTEN COMMUNICATION WHILE, IN FACT, THE AO HAS NEVER ASKED FOR SUCH EVIDENCES. WHATEVER WAS ASKED FOR, WAS DULY SUBMITT ED. ATTENTION WAS DRAWN TOWARDS COPY OF THE NOTICE/LETTER ISSUED BY THE AO. IT WAS FURTHER SUBMITTED THAT ON THE SALES TRANSACTION OF RS.4,77,75,000/ - ON WHICH THE COMMISSION HAS BEEN PAID BY THE ASSESSEE TOWARDS THE PROFESSIONA L CHARGES AFTER DEDUCTING TAX, THE ASSESSEE HAS EARNED PROFIT OF RS.1,71,96,924/ - . RELIANCE WAS ALSO PLACED ON THE ORDER OF CIT(A). II) IN RESPECT OF SUM OF RS. 13 LACS PAID TO MR. AMIT PHAKKE & ORS., IT WAS SUBMITTED THAT A SUM OF RS. 13 LACS AFTER DEDUCTING TDS WAS PAID TO THE FOLLOWING PARTIES : S. NO. NAME AMOUNT PAN NO. 01 AMIT PHAKKE 4,90,000 AIOPP8978L 02 SUSHEELA PHAKKE 4,00,000 ATLPP9972G 03 AARATI PHAKKE 2,10,000 ATCPP1985A 04 ANAND PHAKKE 2,00,000 AMMPP2553M THE AO DISALLOWED THE SAME STATING THAT THESE PARTIES WERE ASKED TO FILE DETAILS REGARDING SERVICES RENDERED ALONGWITH SUPPORTING EVIDENCE IN THE 6 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) FORM OF CONTRACT, AGREEMENT AND WRITTEN COMMUNICATION WHILE, IN FACT, NO SUCH DETAILS WERE ASKED FOR BY THE AO . IN THIS REGARD, ATTENTION WAS DRAWN TO ANNEXURE B. IT WAS SUBMITTED THAT IN REPLY TO THE NOTICE ISSUED U/S 133(6), ALL THESE PARTIES HAVE FILED CONFIRMATION LETTER. ALL THESE PARTIES ARE JOINTLY DOING BUSINESS OF REAL ESTATE. MR. AMIT PHAKKE LIVES I N GOA AND HIS ELDER BROTHER, MR. ANAND PHAKKE ALONGWITH SISTER AARTI AND MOTHER, SUSHEELA PHAKKE LIVE IN DELHI. THESE PARTIES WERE PAID CHARGES TO FACILITATE TRANSACTION OF QUELOSSIM LAND WHICH WAS SOLD TO M/S. WAVE IMPEX PVT. LTD. HAVING THEIR REGISTERED OFFICE AT NEW DELHI FOR RS.4.87 CRORES. THE AMOUNT WAS PAID FOR PROVIDING PROFESSIONAL SERVICES FOR OBTAINING CLEARANCE FOR SALE, COORDINATING BETWEEN PURCHASER AND GETTING THE SALE DEED EXECUTED. THE ARRANGEMENT WITH THE PURCHASE WAS THAT ALL EXPENSES O N ACCOUNT OF SALE DEED INCLUDING RUNNING AROUND SHALL BE BORNE BY THE CAPTIONED ASSESSEE. IN ORDER TO COMPLETE THE SALE FORMALITIES , EVEN WHILE GETTING THE SALE DEED EXECUTED, MR. AMIT PHAKKE WAS MADE A WITNESS ON BEHALF OF THE PURCHASER. ATTENTION WAS DR AWN TOWARDS COPY OF THE INCOME TAX RETURN AS WELL AS CONFIRMATION OF THESE PARTIES FILED DURING THE COURSE OF ASSESSMENT. THE COMMISSION PAID ON THIS TRANSACTION IS QUITE REASONABLE AND HAVE BEEN PAID FOR THE PURPOSE OF THE BUSINESS AND WHICH IS AROUND 2. 8% OF THE TOTAL TRANSACTION. RELIANCE WAS PLACED ON THE ORDER OF CIT(A). III) IN RESPECT OF COMMISSION PAID TO MR. ANTONY MOSES AMOUNTING TO RS.3,50,000/ - IT WAS SUBMITTED THAT THE AO DISALLOWED THE SAID AMOUNT BY OBSERVING THAT THE COMMISSION WAS PAID ONLY T O POSE AS A FRONT OF THE ASSESSEE SO THAT THE PROPERTY IS ACTUALLY PURCHASED BY THE ASSESSEE IN THE NAME OF MR. MOSES AS A BENAMIDAR AND THIS AMOUNT IS PAID TO MR. MOSES TO ACT AS A BENAMIDAR WHICH IS UNLAWFUL AND DISALLOWABLE U/S 7 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) 37(1). IN THIS REGARD, IT IS SUBMITTED THAT IT IS A COMMON PRACTICE IN GOA THAT WHILE DOING BUSINESS, SOMETIMES WHEN THE PROPERTY COMES IN THE MARKET FOR SALE AND AT GOOD LOCATION WITH SUBSTANTIAL MARKET POTENTIAL, SOME GOAN FAMILY ARE RELUCTANT TO SELL THEIR PROPERTY TO NON - GOANS AND IN CASE THE PROSPECTIVE PURCHASER HAD LIKED THE PROPERTY, THE ASSESSEE IS LEFT WITH NO OTHER ALTERNATIVE BUT TO PUT SOME INTERMEDIARY IN BETWEEN SO THAT THE TRANSACTION CAN BE FINALIZED OTHERWISE HE MAY EVEN LOSE THE SMALL PROFIT. IN THIS TRANSACTION , THE ASSESSEE HAS MADE A PROFIT OF RS.5,67,900/ - BUT OUT OF THIS, HE HAS PAID ONLY COMMISSION OF RS.3,50,000/ - TO MR. MOSES. STILL, THE ASSESSEE EARNED PROFIT OF RS.2,17,000/ - . MR. MOSES APPEARED BEFORE THE DEPARTMENT. EVEN HIS STATEMENT WAS ALSO RECOR DED. IN THE STATEMENT, HE CONFIRMED THESE FACTS BUT THE AO EVEN APPRECIATING THE FACTS OPTED FOR DISALLOWANCE. CIT(A) UNDER THESE CONDITIONS DELETED THE DISALLOWANCE. VEHEMENTLY RELIANCE WAS PLACED ON THE ORDER OF CIT(A). IV) A SUM OF RS.11 LACS WAS PAID TO MR. KARL MORAES. THE AO DISALLOWED THIS EXPENDITURE TREATING IT TO BE NON - GENUINE BY STATING THAT THE AO HAS ISSUED SUMMONS TO HIM BUT HE DID NOT ATTEND IN RESPONSE TO THE SUMMONS. THE ASSESSEE HAD PURCHASED A PLOT OF LAND SITUATED AT QUELOS SIM, GOA ON RIVER FRONT FOR A SUM OF RS.2,07,05,500/ - WHICH WAS SOLD FOR RS.4,83,72,500/ - EARNING GROSS PROFIT OF RS.2.76 CRORES . MR. KARL MORAES WAS INSTRUMENTAL IN LOCATING THE OWNER AND THEIR POWER OF ATTORNEY HOLDER MR. RAJESH SARAVYA. A SUM OF RS. 11 LACS WAS PAID AS PER MUTUAL AGREEMENT FOR DOING THIS JOB. MR. KARL MORAES HAS DULY DECLARED THIS INCOME AND HAS PAID THE TAXES. CONFIRMATION WAS DULY FILED BUT THE SAME WAS SUMMARILY REJECTED BY THE AO JUST MAKING GENERAL STATEMENT THAT THESE PAYMENTS W ERE NOT MADE FOR THE PURPOSE OF BUSINESS. CIT(A) TREATED THE PAYMENT TO BE FOR THE PURPOSE OF BUSINESS 8 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) AND DELETED THE ADDITION. HEAVY RELIANCE WAS PLACED ON THE DECISION OF CIT(A). V) IN RESPECT OF SUM OF RS.19 LACS PAID TO MR. PRADEEP SHIRODKAR AND GANG U SHIRODKAR, IT WAS POINTED OUT MR. PRADEEP SHIRODKAR IN RESPONSE TO THE SUMMONS ISSUED BY THE AO APPEARED AND HIS STATEMENT WAS RECORDED. IT WAS SUBMITTED THAT MR. PRADEEP SHIRODKAR APPEARED BEFORE THE AO BUT IN THE STATEMENT HE STATED THAT HE RECEIVED C OMMISSION OF RS. 8 LACS. HE ALSO COULD NOT TELL THE AO THE NAME AND ADDRESS OF THE BUYERS/SELLERS AND EVEN THE DETAILS OF THE PROPERTY INCLUDING THE SURVEY NUMBER. THE AO DISALLOWED THE ENTIRE PAYMENT IN THE CASE OF MR. PRADEEP SHIRODKAR AND A SUM OF RS. 8,10,000/ - IN THE CASE OF GANGU SHIRODKAR FOR WHICH NO NOTICE WAS GIVEN BY THE AO. IT WAS SUBMITTED THAT, IN FACT, THE AMOUNT PAID WAS RS. 19 LACS. THIS AMOUNT WAS DULY SHOWN BY MR. PRADEEP SHIRODKAR IN HIS INCOME TAX RETURN. THE RETURN WAS FILED ON 29. 7.2008 MUCH PRIOR TO THE DATE OF THE STATEMENT WHICH IS DT. 20.12.2010. OUR ATTENTION WAS DRAWN IN THIS REGARD TO PG. 12, 31 - 37 AND 38 - 41 OF THE PAPER BOOK. IN RESPONSE TO THE NOTICE U/S 133(6), HE HAS DULY CONFIRMED THE PAYMENT RECEIVED BY HIM. THE SAID AMOUNT HAS ALSO BEEN DULY SHOWED BY HIM IN HIS PROFIT AND LOSS ACCOUNT FOR WHICH ATTENTION WAS DRAWN TO PG. 41 OF THE PAPER BOOK. IT WAS CONTENDED THAT THESE TWO PARTIES, MR. PRADEEP SHIRODKAR AND GANGU SHIRODKAR ARE LOCAL AGENTS OF THE ASSESSEE AND THEI R JOB WAS TO LOCATE PROPERTY AT VILLAGE LEVEL AND NEGOTIATE PRICE ETC. WITH THE OWNER ON BEHALF OF THE ASSESSEE. BEING LOCAL, IT WAS EASIER FOR THEM TO NEGOTIATE THE PRICE ETC. IN LOCAL DIALECT COMPARED TO OUTSIDERS. THE ASSESSEE STRESSED THAT HE WAS SCA RED WHEN CALLED FOR RECORDING OF THE STATEMENT DURING THE ASSESSMENT PROCEEDINGS. HE CONFIRMED HIS ASSOCIATION WITH THE ASSESSEE AND ALSO CONFIRMED RECEIPT OF SUM OF RS. 8 LACS WHILE, IN FACT, HE WAS PAID RS. 19 9 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) LACS AND THE SAME WAS DULY SHOWN BY HIM IN HIS INCOME - TAX RETURN. TDS HAS DULY BEEN DEDUCTED IN RESPECT OF THE SUM OF RS. 19 LACS BUT NO TDS HAS BEEN DEDUCTED IN RESPECT OF THE PAYMENT MADE TO GANGU SHIRODKAR. CIT(A) ALLOWED THE DEDUCTION OF RS. 8 LACS WHILE THE DISALLOWANCE OF RS. 11 LACS IN RES PECT OF MR. PRADEEP SHIRODKAR AND SUM OF RS. 8,10,000/ - FOR GANGU SHIRODKAR WAS CONFIRMED. VI) IN RESPECT OF THE SUM OF RS. 10 LACS PAID TO MR. GOPAL NAIK, THE DISALLOWANCE WAS CONFIRMED BY CIT(A) BUT THE ASSESSEE HAS NOT COME IN APPEAL. IN RESPECT OF SUM OF RS. 10 LACS PAID TO GOPAL NAIK, IT WAS POINTED OUT THAT TDS HAS DULY BEEN DEDUCTED. NOTICE U/S 131 WAS SENT BY THE AO TO MR. GOPAL NAIK. THE COMMISSION WAS PAID IN CONNECTION WITH SALE OF CAVELOSSIM, MOIRA PROPERTIES. 4.2 THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER OF AO. HE SUBMITTED THAT THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE COMMISSION PAID IS GENUINE AND HAS BEEN PAID FOR THE PURPOSE OF BUSINESS. NO SERVICES WERE RENDERED BY EACH OF THE PARTIES. COMMISSION WAS JUST SHOWN AS BEING PAID TO VARIOUS PARTIES. MERELY THE OTHER PARTIES HAVE SHOWN THE AMOUNT RECEIVED AS ITS INCOME WILL NOT ABSOLVE THE ASSESSEE TO PROVE THE GENUINEITY OF THE EXPENDITURE. IN RESPECT OF MR. PRADEEP SHIRODKAR RELIANCE WAS PLACED ON THE STATEMENT WHICH IS RE - PRODUCED IN THE ASSESSMENT ORDER AND SPECIALLY THE FACT THAT HE HAS CONFIRMED IN THE STATEMENT THAT HE HAS RECEIVED COMMISSION OF RS. 8 LACS. 4.3 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIA L ON RECORD ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE NOTED THAT IN THIS CASE THE ASSESSEE HAS PAID COMMISSION TO THE FOLLOWING PARTIES : 10 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) SR. NO. NAME AMOUNT OF COMMISSION RECEIVED 1 CIPREANO BARRETTO (ADVOCATE) RS. 5,00,000/ - 2 GOPAL NAIK SONARBHAT, VEREM, BARDEZ, GOA RS. 10,00,000/ - 3 ANIL PHAKKE AND OTHERS RS. 13,00,000/ - 4 GANGU SHIRODKAR AND PRADEEP SHIRODKAR RS. 8,10,000/ - RS. 19,00,000/ - 5 KARL MORES RS. 11,00,000/ - 6 DIGITAL FUTURE INDIA (P) LIMITED RS. 40,00,000/ - 7 ANTHONY MOSES RS. 3,50,000/ - 8 RAJESH SARAVYA RS. 15,91,000/ - THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALING IN PROPERTIES AND IS SHOWING INCOME FROM PURCHASE AND SALE TRANSACTIONS FOR THE LAST SEVERAL YEARS. ON THE PURCHASE AND SALE TRANSACTIONS, THE ASSESSEE HAS CLAIMED COMMISSION ALSO IN THE VARIOUS YEARS. IN A.Y. 2004 - 05 TO 2006 - 07 AND 2009 - 10 NO DISALLOWANCE IN RESPECT OF COMMISSION PAID BY THE ASSESSEE WAS EVER MADE. THE AO ALLOWED COMMISSION PAID IN RESPECT OF THE SUM OF RS.4,74,000/ - OUT OF RS.5,00,000/ - PAID TO CIPREANO BARRETTO, ADVOCATE IN RESPECT OF THE SERVICE S RENDERED BY HIM BUT DISALLOWED SUM OF RS.1,20,77,000/ - . WHEN THE MATTER WENT BEFORE CIT(A), CIT(A) ALLOWED THE FOLLOWING COMMISSION : M/S. DIGITAL FUTURE INDIA (P) LTD. - RS.40,00,000/ - AMIT PHAKKE & ORS. - RS.13,00,000/ - ANTHONY MOSES - RS. 3,50,000/ - RAJESH SARAVYA - RS.15,91,000/ - KARL MORAES - RS.11,00,000/ - PRADEEP SHIRODKAR - RS. 8,00,000/ - THUS, THE CIT(A) ALLOWED A SUM OF RS.91,41,000/ - AS COMMISSION WHILE THE BALANCE AMOUNT WAS DISALLOWED. THE ASSESSEE HAS COME IN APPEAL ONLY IN RESPECT OF THE DISALLOWANCE OF RS.19,10,000/ - IN RESPECT OF THE COMMISSION PAID TO PRADEEP SHIRODKAR AND GANGU SHIRODKAR. FOR THE BALANCE AMOUNT NO GROUND 11 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) IS TAKEN BEFORE US. EVEN IN THE GROUNDS OF APPEAL, GROUND WAS MENTIONED FOR RS.18,10,000/ - BUT AT THE TIME OF HEARING IT WAS POINTED OUT THAT THE CORRECT FIGURE IS RS.19,10,000/ - AND THERE HAD BEEN TYPING MISTAKE. WE PERMITTED THE ASSESSEE AND ACCORDINGLY THE FIGURE OF RS.18,10,000/ - WAS AMENDED TO RS.19,10,000/ - . IT IS NOT DENIED THAT THE ASSESSEE WAS ENGAGED I N THE BUSINESS OF SELLING AND BUYING OF PROPERTIES. THE NATURE OF THE BUSINESS, IN OUR OPINION, IS SUCH THAT A NUMBER OF MEDIATORS ARE INVOLVED. ONLY THEN, ULTIMATE DEAL GETS STRUCK. THERE ARE ALWAYS MEDIATORS AND PROFESSIONALS WHO NOT ONLY CHARGE THEIR COMMISSION BUT ALSO CLAIM AMOUNT IN RESPECT OF THE VARIOUS OTHER SERVICES RENDERED BY THEM. A DEAL BETWEEN THE PURCHASER AND SELLER SELDOM GETS STRUCK. ALWAYS THERE HAS TO BE BROKER IN BETWEEN WHO ADVERTISES, CONVINCES THE BUYER, AND CONVINCES THE SELLE R. IT IS ALSO A FACT THAT COMMISSION IS BEING PAID AS PER THE TRADE PRACTICE PREVAILING IN THE AREA. NO TAILOR - MADE GUIDELINES OR RULES OR TERMS AND CONDITIONS CAN BE LAID DOWN. THE COMMISSION IS PAID ONLY AFTER THE DEAL GETS STRUCK AND THEREFORE GENERA LLY THERE IS NO WRITTEN AGREEMENT BETWEEN THE BROKER AND THE PARTIES. 4.3.1 THE ONLY ISSUE BEFORE US IS WHETHER THE COMMISSION PAID BY THE ASSESSEE HAS BEEN INCURRED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. NOW, COMING TO THE RELEVANT PROVISION IN WHICH THE ASSESSEE CLAIMED DEDUCTION IS SECTION 37(1) OF THE INCOME TAX ACT, 1961. SECTION 37(1) READS AS UNDER: - ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OR PR OFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. EXPLANATION: FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE 12 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) FROM THE AFORESAID SECTION, IT IS APPARENTLY CLEAR TH AT EXPENDITURE TO BE ELIGIBLE FOR DEDUCTION U/S 37(1) MUST FULFILL THE FOLLOWING CONDITIONS: - A) THE EXPENDITURE SHOULD NOT BE COVERED BY THE PROVISION OF SECTION 30 TO 36 AS THESE SECTIONS PROVIDE ITS SPECIFIC TREATMENT TO EXPENDITURE LAID DOWN IN THOSE SECTIONS. B) EXPENDITURE SHOULD NOT BE CAPITAL IN NATURE. C) IT IS NOT TO BE PERSONAL EXPENDITURE OF T HE ASSESSEE. D) IT SHOULD BE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSION. E) IT SHOULD BE INCURRED DURING THE PREVIOUS YEAR. F) IT SHOULD NOT BE INCURRED FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW. 4. 3.2 IN THE CASE OF THE ASSESSEE, THERE IS NO DOUBT THAT THE COMMISSION PAID BY THE ASSESSEE IS NOT COVERED BY THE PROVISION OF SECTION 30 TO 36. THERE IS ALSO NO DISPUTE THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS OF REVENUE NATURE AND NOT OF CAPITAL IN NATU RE. THERE IS ALSO NO DISPUTE ABOUT THE FACT THAT THE EXPENDITURE HAS BEEN INCURRED DURING THE RESPECTIVE PREVIOUS YEARS. THERE IS ALSO NO DISPUTE THAT THIS EXPENDITURE HAS NOT BEEN INCURRED FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW. THE EXPENDITURE SO INCURRED BY THE ASSESSEE CANNOT BE REGARDED TO BE THE PERSONAL EXPENDITURE OF THE ASSESSEE. THERE IS NO EVIDENCE ON RECORD THAT THESE EXPENSES WERE INCURRED TO MEET OUT THE PERSONAL NEEDS OF THE ASSESSEE. 4.3.3 THE ONLY DISPUTE IN THIS CASE RELATES TO THE FACT WHETHER THE COMMISSION PAID CAN BE REGARDED TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION OF THE ASSESSEE. BEFORE 1939, THE PHRASE USED WAS EXPENDITURE INCURRED SOLELY FOR THE PURPOS E OF EARNING PROFIT. THE 13 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) OMNIBUS PROVISION OF SECTION 37 AS AMENDED BY 1939 ACT ALLOWS OF EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH BUSINESS/PROFESSION AS LONG AS NO PERSONAL/CAPITAL ELEMENT IS INVOLVED. THE SCOPE OF THE TERM FOR THE PURPOSE OF BUSINESS IS SURELY WIDER THAN THE TERM FOR THE PURPOSE OF EARNING PROFIT. IN OUR OPINION THE INCOME TAX DEPARTMENT CANNOT PRESCRIBE WHAT EXPENDITURE AN ASSESSEE SHOULD INCUR AND UNDER WHAT CIRCUMSTANCES. EVERY BUSINESSMAN KNOWS HIS IN TEREST BEST. THE ASSESSEE MAY NOT BE A PRUDENT MAN AND YET AN EXPENDITURE INCURRED VOLUNTARILY FOR THE PURPOSE OF THE BUSINESS WOULD BE ALLOWABLE U/S 37(1). 4.3.4 THE HONBLE APEX COURT IN THE CASE OF EASTERN INVESTMENT LTD. VS. CIT, 20 ITR 14 (SC), LAID DOWN THE FOLLOWING PRINCIPLES FOR EVALUATION OF WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS: - (I) EVEN IF THE QUESTION MUST BE DECIDED ON THE FACTS OF EACH CASE, THE CONCLUDING DECISION WILL BE ONE OF LAW. (II) IT IS NOT NECESSARY THAT THE EXPENDITURE B E INCURRED FOR EARNING PROFIT. (III) IT IS ENOUGH THAT THE MONEY WAS EXPENDED NOT OF NECESSITY AND WITH A VIEW TO DIRECTING AND IMMEDIATE BENEFIT TO THE TRADE, BUT VOLUNTARILY ON THE GROUND OF COMMERCIAL EXPEDIENCY, AND IN ORDER, INDIRECTLY, TO FACILITATE THE CARRYING ON OF THE BUSINESS. (IV) NO HARD AND FAST RULE CAN BE LAID DOWN TO EXPLAIN WHAT THE WORD SOLELY IS MEANT FOR. THE EXPRESSION WHOLLY AND EXCLUSIVELY USED IN SECTION 37(1) DOES NOT MEAN NECESSARILY. ORDINARILY, IT IS FOR THE ASSESSEE TO DECIDE WHETHER ANY EXPENDITURE SHOULD BE INCURRED IN THE COURSE OF ITS OR HIS BUSINESS. SUCH EXPENDITURE MAY BE INCURRED VOLUNTARILY AND WITHOUT ANY NECESSITY, AND IF IS INCURRED FOR PROMOTING THE BUSINESS AND TO EARN PROFITS, THE ASSESSEE CAN CLAIM DE DUCTION THEREFORE UNDER SECTION 37(1) EVEN THOUGH THERE WAS NO COMPELLING NECESSITY TO INCUR SUCH EXPENDITURE. THE SUPREME COURT, IN THE CASE OF CIT VS MALAYALAM PLANTATION (1964) 53 ITR 140 (SC), HELD THAT IT IS NOT ONLY EXPENDITURE WHICH DIRECTLY RESULTS IN BENEFIT OR ADVANTAGE TO THE ASSESSEE S 14 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) BUSINESS THAT IS ENTITLED TO DEDUCTION, BUT ALSO ANY EXPENDITURE WHICH IS INCURRED WITH A VIEW TO FACILITATING THE CARRYING ON OF THE BUSINESS. 4.3.5 IT IS NOT OPEN TO THE DEPARTMENT TO PRESCRIBE WHAT EXPENDITURE THE ASSESSEE SHOULD INCUR AND IN WHAT CIRCUMSTANCES HE SHOULD INCUR THAT EXPENDITURE. EVERY BUSINESSMAN KNOWS HIS INTEREST BEST AS THIS HAS BEEN CLEARLY LAID DOWN BY THE HON'BLE APEX COURT IN 91 ITR 544 IN THE CASE OF CIT VS DHANRAJGIRI RAJA NARSINGHGIRI. NO DOUBT EVERY BUSINESSMAN IS THE BEST JUDGE OF HIS BUSINESS EXPEDIENCY BUT THE ASSESSING OFFICER IN OUR OPINION HAS THE RIGHT TO KNOW WHETHER THE EXPENDITURE HAS BEEN INCURRED FOR BUSINESS PURPOSES OR NOT OR WHETHER IT HAS BEEN INCURRED FOR OTHER EXTRANE OUS CONSIDERATION. SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF JAIPUR ELECTRO PVT. LTD. VS CIT, 134 CTR 237 (RAJ). THE HON'BLE BOMBAY HIGH COURT HAS ALSO TAKEN THE SIMILAR VIEW IN THE CASE OF RAMANAND SAGAR VS DCIT, 255 I TR 134 (BOM) IN WHICH IT WAS HELD THAT THE MERE FACT THAT THE PAYMENT HAS BEEN MADE UNDER A CONTRACT IS NOT CONCLUSIVE OF EXPENDITURE BEING LAID DOWN WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. ONCE DOUBT ARISE ABOUT THE BONAFIDE NATURE OF THE PAYMENT, IT IS NECESSARY TO LOOK INTO THE NECESSARY CIRCUMSTANCES SUCH AS RELATIONSHIP OF THE PAYEE TO THE ASSESSEE, THE GENERAL STANDARD OF SIMILAR EXPENDITURE IN COMPARABLE BUSINESS, THE TRUE WORTH OF THE SERVICES OR GOODS IN QUESTION AND SO FORTH. IT IS ALSO OPEN TO THE A.O. TO QUESTION THE REALITY OF THE EXPENDITURE I.E., THE TRUE NATURE OF THE PAYMENT, THE TRUE CONSIDERATION FOR IT AND SO FORTH. ONCE THE A.O. CONSIDERS THE PAYMENT AND THE PURPOSE TO BE BONAFIDE, IT IS NOT OPEN FOR HIM TO SUBSTITUTE HIS OWN JUDGMENT WHAT IS THE REASONABLE QUANTUM OF EXPENDITURE FOR THE ASSESSEE. THE A.O. CAN ONLY DECIDE WHETHER THE EXPENDITURE IS REAL, WHETHER IT RELATES TO THE BUSINESS AND IS WHOLLY SPENT FOR THAT PURPOSE. IN APPLYING THE TEST OF COMMERCIAL EXPEDIENCY, FOR DETERMINING WHETHER THE EXPENDITURE WAS WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF THE BUSINESS THE REASONABLENESS OF THE 15 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) EXPENDITURE HAS TO BE JUDGED FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT THE REVENUE, AS HELD IN CIT VS WALCHAND AND CO. (P) LTD. (1967) 65 ITR 381 (SC). THE SIMILAR VIEW HAS BEEN TAKEN IN THE CASES OF JK WOOLLEN MANUFACTURERS VS CIT (1969) 72 ITR 612 (SC); ALUMINUM CORPORATION OF INDIA LTD. VS CIT (1972) 86 ITR 11 (SC) AND CIT VS PANIPAT WOOLLEN AND GENERAL MILLS CO. L TD. (1976) 103 ITR 66 (SC). CONSIDERING THE TRUE IMPORT OF THE EXPRESSION WHOLLY AND EXCLUSIVELY IT WAS OBSERVED BY THE APEX COURT IN SASSOON J DAVIT AND CO. PVT. LTD. VS CIT (1979) 118 ITR 261, THAT THE SAME DOES NOT MEAN NECESSARILY. ORDINARILY, IT I S FOR THE ASSESSEE TO DECIDE WHETHER ANY EXPENDITURE SHOULD BE INCURRED IN THE COURSE OF ITS BUSINESS. SUCH EXPENDITURE MAY BE INCURRED VOLUNTARILY AND WITHOUT ANY NECESSITY AND IF IT IS INCURRED FOR PROMOTING THE BUSINESS AND TO EARN PROFITS, THE ASSESSEE CAN CLAIM DEDUCTION UNDER THE RELEVANT PROVISION EVEN THOUGH THERE WAS NO COMPELLING NECESSITY TO INCUR SUCH EXPENDITURE. THE FACT THAT SOMEBODY OTHER THAN THE ASSESSEE IS ALSO BENEFITED BY THE EXPENDITURE SHOULD NOT COME IN THE WAY OF AN EXPENDITURE BEIN G ALLOWED BY WAY OF DEDUCTION U/S 37 OF THE ACT IF IT OTHERWISE SATISFIES THE TESTS LAID DOWN BY LAW. THE BILL READ ANY EXPENDITURE LAID OUT OR EXPENDED WHOLLY, NECESSARILY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED. IN VIEW OF THE PROTESTS RAISED BY THE TAXPAYERS THE WORD NECESSARILY CAME TO BE DROPPED. IT WILL BE ALSO NOTICED THAT IN CIT VS CHANDULAL KESHAVLAL AND CO. (1960) 38 ITR 601, 610, IT WAS OBSERVED AS FOLLOWS: - ANOTHER FACT THAT EMERGES FROM THESE CASES IS THAT IF THE EXPENSE IS INCURRED FOR FOSTERING THE BUSINESS OF ANOTHER ONLY OR WAS MADE BY WAY OF DISTRIBUTION OF PROFITS OR WAS WHOLLY GRATUITOUS OR FOR SOME IMPROPER OR OBLIQUE PURPOSE OUTSIDE THE COURSE OF B USINESS THEN THE EXPENSE IS NOT DEDUCTIBLE. IN DECIDING WHETHER A PAYMENT OF MONEY IS A DEDUCTIBLE EXPENDITURE ONE HAS TO TAKE INTO CONSIDERATION QUESTIONS OF COMMERCIAL EXPEDIENCY AND THE PRINCIPLES OF ORDINARY COMMERCIAL TRADING. IF THE PAYMENT OR EXPEND ITURE IS INCURRED FOR THE PURPOSE OF THE TRADE OF THE ASSESSEE IT DOES NOT MATTER THAT THE PAYMENT MAY INCUR TO THE BENEFIT OF A THIRD PARTY (USHERS WILTSHIRE BREWERY LIMITED V BRUCE (1914) 6 TAX CASES 399 (HL). ANOTHER TEST IS 16 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) WHETHER THE TRANSACTION IS PROPERLY ENTERED INTO AS A PART OF THE ASSESSEES LEGITIMATE COMMERCIAL UNDERTAKING IN ORDER TO FACILITATE THE CARRYING ON OF ITS BUSINESS; AND IT IS IMMATERIAL THAT A THIRD PARTY ALSO BENEFITS THEREBY. BUT IN EVERY CASE IT IS A QUESTION OF FACT WHETHER TH E EXPENDITURE WAS EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF TRADE OR BUSINESS OF THE ASSESSEE. 4.3.6 IF WE APPLY THE PRINCIPLES OF THE LAW AS ENUNCIATED IN THE VARIOUS JUDGMENTS, WE ARE OF THE OPINION THAT ONCE THE A.O. FINDS THAT THE ASSESSEE H AS BONAFIDELY INCURRED THE EXPENDITURE FOR THE BUSINESS, THE A.O. CANNOT DECIDE THE QUANTUM OF THE EXPENDITURE TO BE INCURRED BY THE ASSESSE. 4.3.7 IN VIEW OF THE AFORESAID LAW, WE WOULD LIKE TO DEAL WITH THE PAYMENT MADE FOR COMMISSION IN RESPECT OF EACH PARTY AS UNDER : I) SO FAR AS COMMISSION OF RS.40 LACS PAID TO M/S. DIGITAL FUTURE INDIA (P) LTD. IS CONCERNED, WE NOTED THAT NOTICE U/S 131 WAS ISSUED TO THE PARTIES AND IN RESPONSE THERETO, THE ASSESSEE HAD DULY CONFIRMED VIDE LETTER DT.29.11.2010 THAT TH EY RECEIVED COMMISSION LESS TDS AMOUNTING TO RS. 40 LACS. EVEN THEY HAVE ENCLOSED ALONGWITH THE LETTER, COPY OF THEIR INCOME TAX RETURN AND BANK STATEMENT. IT IS ALSO A FACT THAT COMMISSION WAS PAID TO THE SAID PARTIES ON THE SALE WORTH RS.4,21,75,000/ - AND THE ASSESSEE HAS ALSO EARNED GROSS PROFIT AMOUNTING TO RS.1,71,96,924/ - . ALL THE COMMISSION HAS BEEN PAID THROUGH CHEQUES. SALES HAS BEEN MADE TO FOUR DIFFERENT PARTIES. THERE IS NO ALLEGATION THAT M/S. DIGITAL FUTURE INDIA (P) LTD. WAS RELATED TO T HE ASSESSEE. EVEN THE ASSESSEE AND THE PARTY HAS SUBMITTED BEFORE THE AO THE DETAILS OF THE PROPERTIES AND THE NAMES OF THE PARTIES WITH WHOM THE SALE TRANSACTION WERE CONCLUDED. ONCE THE ASSESSEE HAS FILED THE EVIDENCE AND THE PARTICULARS OF THE PARTIES , IN OUR OPINION, THE ONUS GETS SHIFTED ON THE AO TO ENQUIRE FROM THESE PARTIES WHETHER M/S. DIGITAL FUTURE INDIA (P) LTD. WAS ASSISTING THE ASSESSEE IN CONCLUDING 17 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) THE DEAL. BUT NO SUCH ONUS WAS EVER DISCHARGED BY THE DEPARTMENT. IN VIEW OF THIS, WE ARE OF THE OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF RS.40 LACS. II) SO FAR AS COMMISSION PAID TO AMIT PHAKKE & ORS. AMOUNTING TO RS.13,00,000 / - IS CONCERNED, THE AO, WE NOTED, NEVER ASKED IN THE NOTICE ISSUED U/S 133(6) FROM THESE PARTIES REGARDING NATURE OF THE SERVICES RENDERED BY THEM. ALL THESE PARTIES ARE REGULAR ASSESSEES. THEY HAVE GIVEN THEIR PAN. EVEN IT WAS STATED BY THESE PARTIES THAT THEY WERE DOING BUSINESS OF REAL ESTATE AND THEY FACILITATED THE TRANSACTION WHICH WAS SOLD TO M/S. WAVE IMPEX PVT. LTD. EVEN AMIT PHAKKE WAS WITNESS ON THE SALE DEED. THE CONFIRMATION IN RESPECT OF EACH OF THESE PARTIES WAS DULY FILED. COPY OF THE IR INCOME TAX RETURN WAS ALSO FILED. THERE IS NOTHING WRONG IF ALL THE FOUR MEMBERS OF THE FAMILY ARE ENGAGED IN THE SAME BUSINESS. THE NATURE OF THE SERVICES WERE DULY EXPLAINED, EVEN NAMES OF THE PARTIES IN RESPECT OF EACH TRANSACTION S THESE PARTIES WE RE PAID COMMISSION WAS DULY EXPLAINED. NO INQUIRY WAS BEING MADE FROM M/S. WAVE IMPEX PVT. LTD. WHETHER THESE PARTIES HAVE RENDERED THE SERVICES OR NOT. UNDER THESE FACTS, IN OUR OPINION, THE CIT(A) WAS CORRECT IN LAW IN DELETING THE DISALLOWANCE OF RS.1 3 LACS. III) SO FAR AS PAYMENT OF RS.3,50,000/ - TO MR. ANTHONY MOSES IS CONCERNED, CIT(A) AFTER GOING THROUGH THE FACTS OF THE CASE NOTED THAT THERE IS NO DIFFERENCE OF OPINION BETWEEN THE AO AND THE ASSESSEE SO FAR AS FACTS OF THE CASE ARE CONCERNED. ASSESSEE HAD DULY PROVED THE TRANSACTION AS WELL AS THE SERVICES RENDERED BY MR. MOSES. IT IS NOT DEN I ED THAT THE SELLER WANTED TO SELL THE PROPERTY ONLY TO A GOAN AND THEREFORE THE ASSESSEE HAS PUT MR. ANTHONY MOSES IN FRONT TO BUY THE 18 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) PROPERTY AND ALL T HE PAYMENTS FOR THE PURCHASE OF THE PROPERTY WAS PAID BY THE ASSESSEE DIRECTLY TO THE SELLER ON BEHALF OF MR. MOSES AS THE PROSPECTIVE PURCHASER HAD LIKED THE PROPERTY AND HAD GIVEN AN ADVANCE. DUE TO THIS REASON, THE ASSESSEE HAD TO PUT MR. MOSES IN BETW EEN. MR. MOSES HAS DULY CONFIRMED ALL THESE FACTS IN HIS STATEMENT RECORDED U/S 131. NO COGENT MATERIAL OR EVIDENCE WAS BROUGHT TO OUR KNOWLEDGE WHICH MAY PROVE THAT MR. ANTHONY MOSES HAD NOT RENDERED ANY SERVICES. WE, ACCORDINGLY, DO NOT FIND THAT IT I S A FIT CASE TO WARRANT OUR INTERFERENCE AND ACCORDINGLY, WE CONFIRM THE DELETION OF THE DISALLOWANCE OF RS.3,50,000/ - . IV) THE DISALLOWANCE OF RS.15,91,000/ - PAID BY ASSESSEE TO MR. RAJESH SARAVYA WAS MADE BY THE AO BECAUSE THE SAID PARTY WAS NOT AVAILABLE A T THE ADDRESS PROVIDED BY THE ASSESSEE. THE COMMISSION HAS BEEN PAID TO THIS PARTY AS THIS PARTY WAS HOLDING THE POWER OF ATTORNEY OF THE QUELOSSIM PROPERTY SITUATED ON RIVER FRONT ON WHICH THE ASSESSEE HAS EARNED GROSS PROFIT OF RS.2.76 CRORES. HE DULY CONFIRMED ABOUT THE RECEIPT OF THE COMMISSION. THE ASSESSEE HAS DULY EXPLAINED THAT THE SAID PROP ERTY WAS OWNED JOINTLY BY MR. RAJESH SARAVYA AND HIS FAMILY MEMBERS AND HE WAS COMMITTED COMMISSION BY THE ASSESSEE SO THAT HE BECAME INSTRUMENTAL IN GETTING THE PRICE FINALIZED FROM THE OTHER FAMILY MEMBERS. THUS, IT IS ANOTHER MODE OF MAKING THE PAYMENT FOR THE PURCHASE MENTIONED IF IT CANNOT BE TAKEN TO BE COMMISSION. IT IS GENERAL PRACTICE THAT IN CASE OF ANY PROPERTY BEING OWNED BY THE FAMILY MEMBERS, ON E PERSON ONLY TAKES THE LEAD ON BEHALF OF THE OTHER PARTIES AND BECOMES INSTRUMENT AL IN GETTING THE DEAL STRUCK AND SOMETIMES SUCH PERSON IS PAID OVER AND ABOVE THE CONSIDERATION AGREED. IN VIEW OF THIS FACT, IN OUR OPINION, CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.15,91,000/ - . 19 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) V) SO FAR AS PAYMENT OF COMMISSION OF RS.11 LACS TO MR. KARL MORAES IS CONCERNED, IT WAS DULY SUBMITTED BY THE ASSESSEE THAT THIS PARTY HAS WORKED AS A MEDIATOR IN GETTING THE DEAL STRUCK WITH MR. RAJESH SARAVYA AND THE COMMISSIO N WAS MADE TO THIS PERSON IN THIS REGARD. EVEN THE LETTER OF CONFIRMATION WAS ALSO FILED BY THIS PERSON DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HE IS AN INCOME TAX ASSESSEE. COPY OF THE INCOME TAX RETURN WAS ALSO FILED. WE DO NOT FIND ANY ILLEGALI TY IN THIS REGARD IN THE ORDER OF CIT(A) IN DELETING THE DISALLOWANCE OF RS. 11 LACS. VI) NOW, COMING TO THE COMMISSION PAID TO MR. PRADEEP SHIRODKAR AMOUNTING TO RS. 19 LACS AND GANGU SHIRODKAR AMOUNTING TO RS.8,10,000/ - , WE NOTED FROM THE STATEMENT RECORDED FROM MR. PRADEEP SHIRODKAR THAT HE HAS STATED THAT HE RECEIVED COMMISSION OF RS. 8 LACS. THIS STATEMENT WAS RECORDED ON 20.12.2010 BUT FROM THE COPY OF THE RETURN WHICH HAS BEEN FILED BY MR . PRADEEP SHIRODKAR, COMMISSION OF RS. 19 LACS HAS DULY BEEN SHOWN. THE RETURN WAS FILED ON 29.7.2008. HE WAS AN ASSOCIATE OF THE ASSESSEE. THIS FACT HAS ALSO BEEN ACCEPTED BY HIM BUT HE COULD NOT GIVE DETAILS OF INDIVIDUAL PROPERTIES. AT THE TIME OF RE CORDING OF THE STATEMENT IT MAY BE POSSIBLE THAT MR. PRADEEP SHIRODKAR, SINCE THE STATEMENT WAS RECORDED AFTER EXPIRY OF 2 YEARS, MAY HAVE FORGOTTEN THE AMOUNT OF COMMISSION RECEIVED BY HIM. IN THE STATEMENT HE DID NOT DENY THAT HE HAS RENDERED THE SERV ICES TO THE ASSESSEE IN LOCATING THE PROPERTIES. HE IS AN INCOME TAX ASSESSEE. THE PAYMENT HAS BEEN RECEIVED BY HIM THROUGH CHEQUE. IF THE EVIDENCE ON RECORD SPEAKS OF THAT THE ASSESSEE HAS PAID COMMISSION OF RS. 19 LACS, IN OUR OPINION, IT WILL NOT JUS TIFIED TO ALLOW COMMISSION ONLY TO THE EXTENT OF RS. 8 LACS MERELY ON THE 20 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) BASIS THAT IN THE STATEMENT, THE PARTY HAS STATED THAT HE RECEIVED COMMISSION OF RS. 8 LACS. IF MR. PRADEEP SHIRODKAR WOULD HAVE RECEIVED COMMISSION OF RS. 8 LACS, HE WOULD HAVE NOT SHOWN IN INCOME TAX RETURN COMMISSION OF RS. 19 LACS. EVEN THE REVENUE HAS NOT CONFRONTED MR. PRADEEP SHIRODKAR WITH THE COPY OF HIS INCOME TAX RETURN. UNDER THESE CIRCUMSTANCES, WE CONFIRM THE DISALLOWANCE OF RS. 8 LACS AND FURTHER DELET E THE DISALLOWA NCE OF RS. 11 LACS. VII) SO FAR AS THE PAYMENT OF RS. 8,10,000/ - MADE TO GANGU SHIRODKAR IS CONCERNED, WE NOTED THAT THERE IS NO EVIDENCE ON RECORD THAT SHE HAS RENDERED ANY SERVICES TO THE ASSESSEE. EVEN SHE IS NOT AN INCOME TAX ASSESSEE. EVEN THE ASSESSE E HAS NOT DEDUCTED ANY TAX IN RESPECT OF THE PAYMENT MADE TO HER. EVEN BEFORE US ALSO THE ASSESSEE HAS NOT SUBMITTED ANY EVIDENCE IN RESPECT OF WHICH PROPERTY SHE HAS RENDERED SERVICES. IN VIEW OF THIS, WE CONFIRM THE DISALLOWANCE OF RS.8,10,000/ - . 4. 3.8 IN THE RESULT, THE GROUND NO. 1 TAKEN BY THE REVENUE STANDS DISMISSED WHILE GROUND NO. 1 TAKEN BY THE ASSESSEE IS PARTLY ALLOWED. WE MAY ALSO CLARIFY THAT WHILE DISPOSING OFF THESE GROUNDS, THE ASSESSEE HAS ARGUED DURING THE COURSE OF THE ARGUMENT IN RESPECT OF COMMISSION PAID TO MR. GOPAL NAIK AMOUNTING TO RS. 10 LACS BUT NO SUCH GROUND IS TAKEN BEFORE US FOR DISALLOWANCE SUSTAINED BY THE CIT(A) IN THIS REGARD. OUR JURISDICTION IS LIMITED TO THE GROUNDS TAKEN BEFORE US. 5. GROUND NO. 2 IN REVENUES APPEAL AS WELL AS GROUND NO. 2 OF ASSESSEES APPEAL RELATE TO THE COMMON ISSUE RELATING TO ALLOWING OF THE EXPENDITURE ON FOREIGN TRAVEL. FACTS RELATING TO THIS ISSUE ARE THAT THE AO NOTED DURING THE COURSE OF THE ASSESSMENT THAT THE ASSESSEE HAS INCURRED SUM OF RS.1,25,000/ - 21 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) UNDER THE HEAD FOREIGN TRAVEL. THE AO DISALLOWED THE SUM AS THE WHOLE OF THE FOREIGN TRAVEL WAS UNDERTAKEN ON TOURIST VISA AND THE ASSESSEE COULD NOT SHOW ANY TRANSACTION TO HAVE BEEN EFFECTED WITH PERSONS NOT RESIDING IN INDIA. WH EN THE MATTER WENT BEFORE THE CIT(A), CIT(A) ALLOWED 50% OF THE EXPENSES BY OBSERVING AS UNDER : 9.2 I HAVE GONE THROUGH THE REASONS GIVEN BY THE A.O. AND THE SUBMISSIONS OF THE APPELLANT. THE APPELLANT WAS EARLIER A BRITISH NATIONAL AND HIS SON IS STILL SETTLED IN U.K. THEREFORE, THE CONTENTION OF THE APPELLANT THAT THE FOREIGN TRAVEL EXPENSES WERE INC URRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE, CANNOT BE ACCEPTED. LEARNED COUNSEL OF THE ASSESSEE ALSO AGREED AND STATED THAT IF 50% OF THE FOREIGN TRAVEL EXPENSES ARE ALLOWED, THE ENDS OF JUSTICE WOULD BE MET. ACCORDINGLY , THE A.O., IS DIRECTED TO ALLOW 50% OF THE FOREIGN TRAVEL EXPENSES, I.E. RS.62,500/ - AND BALANCE ADDITION OF RS.62,500/ - IS CONFIRMED. 5.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT THE ASSESSEE HAS RECEIVED CO MMISSION OF RS.7 LACS FROM PERSON RESIDING OUTSIDE INDIA AND THE DETAILS OF THE COMMISSION WERE FILED BEFORE AO. THIS FACT HAS NOT BEEN DENIED BY THE LD. DR. UNDER THESE FACTS AND CIRCUMSTANCES, IT CANNOT BE SAID THAT THE WHOLE OF THE FOREIGN TRAVEL WAS NOT FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IN OUR VIEW NO INTEREFERENCE IS CALLED FOR IN THE ORDER OF CIT(A). WE, ACCORDINGLY, DISMISS GROUND NO. 2 OF ASSESSEES APPEAL AS WELL AS REVENUES APPEAL. 6. GROUND NO. 3 OF REVENUES APPEAL RELATES TO AL LOWANCE OF DEPRECIATION ON THE CAR. THE ASSESSEE CLAIMED DEPRECIATION ON THE CAR. THE AO DISALLOWED 50% OF THE DEPRECIATION IN VIEW OF THE FACT THAT THE CAR MIGHT HAVE BEEN USED FOR PERSONAL PURPOSES. WHEN THE MATTER WENT BEFORE CIT(A), CIT(A) RESTRICTED THE DISALLOWANCE TO 20% OF THE DEPRECIATION. ESTIMATE IS ALWAYS AN ESTIMATE. THE PERSONAL USE OF THE CAR IS NOT DENIED EVEN ON BEHALF OF THE ASSESSEE. IN OUR OPINION, CIT(A) HAS RIGHTLY RESTRICTED THE DISALLOWANCE TO 20% OF THE 22 ITA NO. 62&64/PNJ/2013 & CO NO. 8/PNJ/2013 (ASST. YEAR : 2008 - 09) DEPRECIATION CLAIMED BY THE ASSESSEE. THUS, THIS GROUND TAKEN BY THE REVENUE STANDS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED WHILE THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 8. ORDER PRONOUNCED IN OPEN COURT ON 5 /07/2013. SD/ - (D.T.GARASIA) JUDICIAL MEMBER SD/ - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 5 /07/ 2013 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT, PANAJI (4) CIT(A), PANAJI (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER SR. P RIVATE S ECRETARY ITAT, PANAJI, GOA