Kusum Devi Agarwal, Kolkata V. DCIT, Circle-37 Kolkata, Kolkata

ITA 630/KOL/2012

• Counselvise Citation: 63023514 RSA 2012
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 19-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S S GUPTA

Judgement Text

I.T.A. NO.: 631/KOL./2012 ASSESSMENT YEAR : 2007-08 PAGE 1 TO 7 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA CORAM : SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ABRAHAM P. GEORGE (ACCOUNTANT MEMBER) I.T.A. NO.: 630/KOL./ 2012 ASSESSMENT YEAR : 2004-2005 KUSUM DEVI AGARWAL,................................ .............................APPELLANT 84/1B, TOPSIA ROAD (SOUTH), SUITE-3C, HITECH CHAMBERS, KOLKATA-700 046 [PAN : ACQPA 9824 N] -VS.- DEPUTY COMMISSIONER OF INCOME TAX, ........ .RESPONDENT CIRCLE-37, KOLKATA, 8 TH FLOOR, PODDAR COURT, 18, RABINDRA SARANI, KOLKATA-700 001 APPEARANCES BY: SHRI S.S. GUPTA, A.R., FOR THE ASSESSEE SHRI SABOORUL HASAN USMANI, SR. D.R., FOR THE DEPAR TMENT DATE OF CONCLUDING THE HEARING : NOVEMBER 07, 2013 DATE OF PRONOUNCING THE ORDER : NOVEMBER 21, 2013 O R D E R PER BENCH: 1. THIS APPEAL FILED BY THE ASSESSEE IS AGAINST AN ORDER DATED 23 RD FEBRUARY, 2012 OF COMMISSIONER OF INCOME TAX (APPEA LS)-XXIV, KOLKATA FOR ASSESSMENT YEAR 2004-05. 2. GRIEVANCE RAISED BY THE ASSESSEE IN HER APPEAL I S THAT LD. CIT(APPEALS) SUSTAINED THE DISALLOWANCE TO THE EXTE NT OF RS.4,81,794/- OUT OF CLAIM OF RS.11,66,862/- MADE BY HER. 3. FACTS APROPOS ARE THAT ASSESSEE, A MANUFACTURER OF CHEMICALS, RUNNING SUCH BUSINESS THROUGH A PROPRIETORSHIP CONC ERN CALLED TECHNO PRODUCTS INDIA HAD FILED HER RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT DECLARING TOTAL INCOME OF RS.7,69,620/-. DURING THE COURSE OF I.T.A. NO.: 631/KOL./2012 ASSESSMENT YEAR : 2007-08 PAGE 1 TO 7 ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY ASSESSING OFFICER THAT ASSESSEE HAD PAID COMMISSION OF RS.18,22,908/-, WHICH, INTER ALIA, INCLUDED RS.11,66,863/- PAID TO M/S. NAVYUG PACKAGING PVT. L TD. AND RS.6,56,045/- PAID TO M/S. BLUE CHIP AGENCY AND COMMODITIES PVT. LTD. M/S. BLUE CHIP AGENCY WAS A FAMILY CONCERN, WHEREIN ASSESSEES SON S WERE THE DIRECTORS. M/S. NAVYUG PACKAGING PVT. LTD., AS PER ASSESSING O FFICER, WAS MANUFACTURER OF MULTILAYER FILMS AND GOODS USED FOR PACKING. AS PER ASSESSING OFFICER, THERE WAS NO CONNECTION BETWEEN BUSINESS CARRIED ON BY M/S. NAVYUG PACKAGING PVT. LTD. AND THAT OF ASSE SSEE. ASSESSING OFFICER ISSUED SUMMONS TO ONE MR. MOHAN YADUKA, WHO WAS LOO KING AFTER THE BUSINESS OF NAVYUG PACKAGING PVT. LTD. AND IT SEEMS THAT SAID SHRI MOHAN YADUKA DENIED PERFORMING ANY SALES SOLICITATION FOR ASSESSEES PROPRIETARY CONCERN, NAMELY M/S. TECHNO PRODUCTS IN DIA. ASSESSING OFFICER DISBELIEVED THE STATEMENT GIVEN BY CHARTERE D ACCOUNTANT OF M/S. NAVYUG PACKAGING PVT. LTD. WHO HAD STATED THAT LATT ER COMPANY HAD INDEED RENDERED SERVICES FOR ASSESSEE. ON THIS PREM ISES, HE DISALLOWED RS..8,24,328/- OUT OF THE PAYMENT CLAIMED TO HAVE B EEN MADE TO NAVYUG PACKAGING PVT. LTD., AND REDUCED THE COMMISSION PAY MENT TO M/S. BLUE CHIP AGENCY & COMMODITIES PVT. LTD. FROM 8% TO 4% O F SALES. 4. WHEN THE MATTER CAME UP IN APPEAL BEFORE CIT(APP EALS), LD. CIT(APPEALS) DELETED DISALLOWANCE OF CLAIM OF RS.8, 24,328/- PERTAINING TO M/S. NAVYUG PACKAGING PVT. LTD. AS PER CIT(APPEALS) ASSESSING OFFICER HAD ACCEPTED RENDERING OF SERVICES BY M/S. NAVYUG P ACKAGING PVT. LTD. THROUGH ITS DIRECTOR SHRI G. SARAF. CIT(APPEALS) NO TED THAT OBJECTION OF ASSESSING OFFICER WAS ONLY WITH REGARD TO QUANTUM O F COMMISSION. MATTER WAS CARRIED IN APPEAL BEFORE TRIBUNAL AND TRIBUNAL VIDE ITS ORDER DATED 17.10.2008 IN ITA NO. 372/KOL/2008 REMITTED THE ISS UE OF DISALLOWANCE OF COMMISSION BACK TO ASSESSING OFFICER, FOR CONFRO NTING ASSESSEE WITH STATEMENT OF PARTIES AND RESULTS OF ENQUIRIES. I.T.A. NO.: 631/KOL./2012 ASSESSMENT YEAR : 2007-08 PAGE 1 TO 7 5. ACCORDINGLY, ASSESSING OFFICER TOOK UP THE MATTE R ONCE AGAIN. LETTERS WERE ISSUED BY ASSESSING OFFICER TO SIX COM PANIES TO WHOM SALES WERE AFFECTED BY ASSESSEE IN PURSUANT TO THE SERVIC ES OF NAVYUG PACKAGING PVT. LTD. THEREAFTER HE CONCLUDED THAT OU T OF TOTAL CLAIM OF COMMISSION TO M/S. NAVYUG PACKAGING PVT. LTD. A SUM OF RS.8,24,328/- COULD NOT BE ALLOWED. DETAILS OF DISALLOWANCES MADE BY ASSESSING OFFICER CAN BE SUMMARISED AS UNDER: SL. NO. PARTY SALES MADE COMMISSION GIVEN ALLOWED BY AO DISALLOWED BY AO 1. BIRLA TYRES LTD. 40,84,366 2,45,062 1,22,531 1,22,531 2. NATIONAL ORGANIC CHEMICALS INDUSTRIES LTD. 73,33,432 4,40,006 2,20,003 2,20,003 3. APOLLO TYRES LTD. 57,90,720 3,47,443 - 3,47,443 4. TYRE CORPORATION OF INDIA LTD. 12,52,150 75,129 - 75,129 5. MICHIGAN RUBBER INDIA LTD. (FORMERLY BETUL TYRE & TUBE INDUSTRIES LTD.) 9,87,047 59,222 - 59,222 TOTAL 8,24,328 6. AGGRIEVED ON DISALLOWANCE OF RS.8,24,328/- OUT O F TOTAL SUM OF RS.11,66,863/-, ASSESSEE ONCE AGAIN MOVED APPEAL BE FORE CIT(APPEALS). CIT(APPEALS) AFTER VERIFYING REPLIES RECEIVED BY AS SESSING OFFICER ON THE ENQUIRIES CONDUCTED WITH PARTIES MENTIONED ABOVE CA ME TO A CONCLUSION THAT ASSESSEE HAD SUBSTANTIATED THE SERVICES RENDER ED BY NAVYUG PACKAGING PVT. LTD., IN SO FAR AS SALES AFFECTED TO M/S. BIRLA TYRES LTD., AND M/S. NATIONAL ORGANIC CHEMICALS INDUSTRIES LTD. WAS CONCERNED, HOWEVER, ACCORDING TO HIM FOR SALES EFFECTED BY OTHER THREE COMPANIES NAMELY, APOLLO TYRES LTD., TYRE CORPORATION OF INDIA LTD. A ND MICHIGAN RUBBER INDIA LTD. NO SERVICES WERE RENDERED BY NAVYUG PACK AGING PVT. LTD. HE, I.T.A. NO.: 631/KOL./2012 ASSESSMENT YEAR : 2007-08 PAGE 1 TO 7 THEREFORE, GAVE FURTHER RELIEF OF RS.3,42,534/- AND RESTRICTED DISALLOWANCE TO RS.4,81,794/-. 7. NOW BEFORE US, A.R. STRONGLY ASSAILING THE ORDER OF CIT(APPEALS) SUBMITTED THAT NAVYUG PACKAGING PVT. LTD. HAD CONFI RMED RECEIPT OF SALES COMMISSION. ACCORDING TO HIM, ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH M/S. NAVYUG PACKAGING PVT. LTD. ON 01.04.2003 WHEREIN IT WAS MENTIONED THAT M/S. NAVYUG PACKAGING PVT. LTD. WOUL D RENDER SERVICE FOR CANVASSING SALE OF ASSESSEES PRODUCTS TO THE PARTI ES WHICH SPECIFICALLY INCLUDED M/S. APOLLO TYRES LTD., TYRE CORPORATION O F INDIA LTD., BIRLA TYRES & TUBES INDUSTRIES LTD., WHICH WAS LATER KNOW N AS MICHIGAN RUBBER INDIA LTD.. THEREFORE, ACCORDING TO HIM THE COMMISS ION PAYMENTS SHOULD BE ALLOWED. PAYMENTS WERE AFFECTED THROUGH BANKING CHANNELS AND RECEIPTS WERE ACKNOWLEDGED BY NAVYUG PACKAGING PVT. LTD. AS PER A.R., THERE WAS NO WAY THAT PART OF COMMISSION BASED ON A GENCY AGREEMENT COULD BE ALLOWED WHEREAS OTHER PART COULD BE DISALL OWED. FURTHER AS PER AR, LOWER AUTHORITIES HAD NO REASON TO GO INTO THE PAYMENTS WHEN RECIPIENTS HAD CONFIRMED THE RECEIPT OF COMMISSION. SALES WERE AFFECTED TO THE CONCERNED PARTIES BY ASSESSEE. JUST BECAUSE THE SAID PARTIES DID NOT ACKNOWLEDGE SERVICES HAVING BEEN RENDERED FOR ASSES SEE WITH REGARD TO CANVASSING OF SALES WOULD NOT MEAN THAT M/S. NAVYUG PACKAGING PVT. LTD. HAD NOT RENDERED ANY SERVICES. AS PER AR, HONBLE M ADRAS HIGH COURT IN THE CASE OF SANJEEVI & CO. VS. CIT REPORTED IN 6 2 ITR 156 HAD CLEARLY HELD THAT IT WAS NOT FOR THE ASSESSING OFFICER TO G O INTO THE REASONS FOR COMMISSION PAYMENT AND ONCE AN EXPENDITURE WAS REAL LY INCURRED AND PAYMENT WAS MADE WHOLLY AND EXCLUSIVELY FOR THE PUR POSE OF BUSINESS, IT SHOULD BE ALLOWED. 8. PER CONTRA LD. D.R. STRONGLY SUPPORTED THE ORDER OF CIT(APPEALS). HE STATED THAT CLAIM OF ASSESSEE WITH REGARD TO COM MISSION PAYMENT TO M/S. NAVYUG PACKAGING PVT. LTD., IN SO FAR AS IT WA S CONFIRMED BY THE PARTIES WAS ALLOWED, AND THE DISALLOWANCE WAS CONFI NED ONLY TO THOSE I.T.A. NO.: 631/KOL./2012 ASSESSMENT YEAR : 2007-08 PAGE 1 TO 7 CASES WHERE THIRD PARTIES HAD DENIED ANY SERVICES T O HAVE BEEN RENDERED BY M/S. NAVYUG PACKAGING PVT. LTD. 9. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PARTIE S AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FOR SALES ARRANGED BY M/S. NAVYUG PACKAGING PVT. LTD. TO M/S. BIRLA TYRES AND M/S. NA TIONAL ORGANIC CHEMICALS INDUSTRIES LTD., ASSESSING OFFICER HAD AL LOWED 50% OF COMMISSION, WHEREAS CIT(APPEALS) HAD ALLOWED CLAIM IN FULL. CIT(APPEALS) CONSIDERED THE LETTERS GIVEN BY TWO PA RTIES NAMELY BIRLA TYRES LTD. AND M/S. NATIONAL ORGANIC CHEMICALS INDU STRIES LTD. AND CAME TO THE CONCLUSION THAT NAVYUG PACKAGING PVT. LTD. H AD RENDERED SERVICES IN RESPECT OF THESE TWO PERSONS. HOWEVER, WITH REGA RD TO THREE OTHER PARTIES NAMELY APOLLO TYRES, TYRE CORPORATION OF IN DIA LTD. AND MICHIGAN RUBBER INDIA LTD., THE POSITION WAS DIFFERENT. APOL LO TYRES LTD. HAD DENIED ANY CANVASSING OR SALES PROMOTED BY M/S. NAV YUG PACKAGING PVT. LTD. SIMILARLY, M/S. TYRE CORPORATION OF INDIA LTD. HAD ALSO DENIED ANY SERVICE RENDERED BY M/S. NAVYUG PACKAGING PVT. LTD. WITH REGARD TO NATIONAL ORGANIC CHEMICALS INDUSTRIES LTD. REPLY GI VEN BY THE PARTY WAS THAT ORDER WAS PLACED TO ONE ASISH AGARWAL FOR MATE RIAL SUPPLIED BY ASSESSEE. ASISH AGARWAL WAS SON OF ASSESSEE AND DIR ECTOR OF BLUE CHIP AGENCY AND COMMODITIES PVT. LTD. AS PER ASSESSEE, E XISTENCE OF AGREEMENT WITH M/S. NAVYUG PACKAGING PVT. LTD. FOR PAYMENT OF COMMISSION WOULD BE SUFFICIENT TO JUSTIFY THE PAYME NT OF COMMISSION WHEN THE LATTER PARTY HAD CONFIRMED RECEIPT OF COMM ISSION. IN OUR OPINION, THE PERTINENT QUESTION IS WHETHER EXPENDIT URE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE OF THE ASSESSEE OR NOT. THREE PARTIES FOR WHOM SALES WERE ALLEGEDLY CANVASSED BY M/S. NAVYUG PACKAGING PVT. LTD., AGAINST WHICH CLAIM OF COMMISS ION WAS NOT ALLOWED, HAD SPECIFICALLY STATED THAT THEY HAD DIRECT DEALIN GS WITH ASSESSEE. M/S. MICHIGAN RUBBER INDIA LTD. HAD EVEN STATED THAT THE Y WERE NOT AWARE OF M/S. NAVYUG PACKAGING PVT. LTD. NOR ITS EMPLOYEE C ALLED MOHAN YEDUKA. M/S. TYRE CORPORATION OF INDIA LTD. STATED THAT FOR PROCUREMENT OF I.T.A. NO.: 631/KOL./2012 ASSESSMENT YEAR : 2007-08 PAGE 1 TO 7 BONDING AGENT DONE FROM THE ASSESSEE, THERE WAS NO DEALING WITH M/S. NAVYUG PACKAGING PVT. LTD. M/S. APOLLO TYRES LTD. H AD ALSO CONFIRMED THAT THE DEALINGS WERE DIRECT WITH ASSESSEES PROPRIETOR SHIP CONCERN M/S. TECHNO PRODUCTS INDIA LTD. THEREFORE, IN THREE CASE S, NOTHING HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THAT COMM ISSION PAYMENT WAS EXCLUSIVELY AND WHOLLY MADE FOR THE PURPOSE OF BUSI NESS. HONBLE MADRAS HIGH COURT IN THE CASE OF SANJEEVI & CO. (SUPRA) HA D HELD THAT IF PAYMENT OF COMMISSION IS MADE WHOLLY AND EXCLUSIVELY FOR BU SINESS PURPOSE, NO FURTHER QUESTION CAN ARISE AS TO REASONABLENESS OR OTHERWISE OF THE QUANTUM OF COMMISSION PAID. HOWEVER, THEIR LORDSHIP S DID OBSERVE THAT JURISDICTION IS THERE WITH THE REVENUE FOR DECIDING THE REALITY OF THE EXPENDITURE, NAMELY, WHETHER THE AMOUNT CLAIM FOR D EDUCTION WAS FACTUALLY EXPENDED OR NOT, AND WHETHER IT WAS WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. JUST BECAUSE THE AGENT CON FIRMED RECEIPT OF COMMISSION, IT WOULD NOT BE MAKE ALL PAYMENTS EFFEC TED TO HIM EXCLUSIVELY AND WHOLLY FOR BUSINESS PURPOSE. IN TWO CASES, WHERE THE CONCERNED PARTIES HAD CONFIRMED THE ROLE OF M/S. NA VYUG PACKAGING PVT. LTD., LD. CIT(APPEALS) HAD DIRECTED FULL ALLOWANCE OF THE COMMISSION AND RESTRICTED THE CLAIM ONLY WHEN THE CONCERNED PARTIE S HAD DENIED ANY LINKAGE WITH M/S. NAVYUG PACKAGING PVT. LTD. IN THE SE CIRCUMSTANCES, WE ARE OF THE OPINION THAT VARIOUS CASES RELIED ON BY A.R. OF ASSESSEE WOULD NOT HELP HER CASE. WE DO NOT FIND ANY GOOD REASON T O INTERFERE WITH THE ORDER OF LD. CIT(APPEALS) 10. IN THE RESULT, APPEAL OF ASSESSEE STANDS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DAY OF NOVEMBER, 2013. SD/- SD/- MAHAVIR SINGH ABRAHAM P. GEORGE (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 21 ST DAY OF NOVEMBER, 2013 I.T.A. NO.: 631/KOL./2012 ASSESSMENT YEAR : 2007-08 PAGE 1 TO 7 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.