Rajendra V. Rajyaguru (HUF), Vadodara V. ITO, Ward-2(4), , Vadodara

ITA 632/AHD/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0775 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-12-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 12-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K GOYAL
• Keywords: Business income; Business expenditure; Proportionate interest; TDS
• Section: 251; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENC H (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER) ITA. NO: 632/AHD/2018 (ASSESSMENT YEAR: 2011-12) RAJENDRA V RAJYAGURU (HUF) 203 HELIX COMPLEX SAYAJIGANJ, VADODARA- 390001 V/S INCOME TAX OFFICER, WARD- 2(4), VADODARA (APPELLANT) (RESPONDENT) PAN: AAGHR3894B APPELLANT BY : SHRI SUNIL TALATI, A.R. RESPONDENT BY : SHRI N.K. GOYAL, SR. D.R. ( )/ ORDER DATE OF HEARING : 02 -12-201 9 DATE OF PRONOUNCEMENT : 09 -12-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)-5, VADODRA DATED 20.12.2017 PERTAINING TO A. Y. 2011-12 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 632/ AHD/2018 . A.Y. 2011-12 2 YOUR APPELLANT BEING DISSATISFIED WITH THE ORDER PA SSED BY HON'BLE COMMISSIONER OF INCOME TAX (A) - 2, VADODARA IN APPEAL NO. CAB/1 1-409/13-14, DATED 17.02.2014 RECEIVED BY US ON 21.02.2014 PRESENTS TH IS APPEAL AGAINST THE SAID ORDER ON THE FOLLOWING AMONGST OTHER GROUNDS: 1. THE ORDER PASSED BY THE LEARNED CIT (A) - 2 VADO DARA, IS BAD IN LAW, CONTRARY TO LEGAL PRONOUNCEMENTS AND SAME BE QUASHED. THE DI SALLOWANCES/ADDITIONS ARE UNWARRANTED AND SAME BE DELETED NOW. 2. THE HON'BLE CIT (A) - 2 VADODARA, HAS ERRED BY C ONFIRMING ADDITION OF RS 5,31,200/- MADE BY THE AO ON ACCOUNT OF COMMISSION PAID TO THREE PERSONS AS DETAILED IN PARA 3 OF THE ASSESSMENT ORDER. YOUR AP PELLANT SUBMITS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND HEARING WI TH CIT(A) , THE NECESSARY DETAILS IN SUPPORT OF THE CLAIM WERE FILED. HOWEVER , THE HON'BLE CIT(A) BARODA HAS CONFIRMED THE DISALLOWANCE IN APPEAL NO. CAB/11-409 /13-14. THE APPELLANT IS IN APPEAL AGAINST THE DISALLOWANCE CONFIRMED AS ABOVE. YOUR APPELLANT SUBMITS THAT THE DISALLOWANCE BEING UNJUST AND UNCALLED FOR SAME BE DELETED NOW. 3.THE LEARNED C I T (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF COMMISSION PAID TO THREE PARTIES IGNORING ALL THE MATERIALS AN D EVIDENCES FILED PROVING THE GENUINENESS OF THE PARTIES .CONFIRMATIONS AND PROOF OF SERVICES RENDERED AND HAS ERRED IN GIVING INCORRECT FINDING. IT IS SUBMITTED THAT BASED ON THE EVIDENCES AND MATERIALS FILED THE COMMISSION PAID TO ALL THE THRE E PARTIES TOTALING TO RS 5,31,200/- BE ALLOWED. 4. THE LEARNED CIT(A) - 2 VADODARA, HAS ERRED IN CO NFIRMING THE CHARGING OF INTEREST UNDER SECTION 234A/B/C/D. IT BE HELD SO NO W AND SAME BE DELETED. YOUR APPELLANT CRAVES FOR TO LEAVE ADD/ALTER/AMEND ANY GROUNDS OF APPEAL BEFORE HEARING OF THIS APPEAL. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF TEXTILE YEARNS, EQUITY SHARES AND COMMISSION AGENCY. 3. FACTS OF THE CASE ARE AS EMANATED FROM THE ASSESSME NT ORDER: 2. BUSINESS ACTIVITIES:- THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF TEXTILE YARNS, EQUITY SHARES AND COMMISSION AGENCY. TOTAL TURN OVER HAS BEEN SHOWN A T RS. 14.95 CRORES. NET PROFIT HAS BEEN SHOWN AT RS.L1,01,572/-. IT HAS CLAIMED DE DUCTION OF RS.50,644/- UNDER CHAPTER-VIA OF THE ACT. ITA NO. 632/ AHD/2018 . A.Y. 2011-12 3 3. SALES COMMISSION: RS.5,31,200/- (A) THE ASSESSEE HAS CLAIMED SALES COMMISSION EXPENSES OF RS. 10,94,5007- OUT OF WHICH A SUM OF RS. 5,31,2007- HAS BEEN CLAIMED IN T HE NAMES OF THE FOLLOWING PERSONS:- NAME AMOUNT OF COMMISSION SMT. SARLABEN PRAVIN SHAH RS.L,56,200/- SMT. FALGUNI A RAJYAGURU RS.2,00,000/- SRI HIMANSHU BHAVSAR RS. 1,75,000/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE WAS REQUESTED TO JUSTIFY ITS CLAIM OF SALES COMMISSION EXPENSES CLAI MED IN THE NAMES OF ABOVE PERSONS. THE ASSESSEE SUBMITTED COPIES OF SALES COM MISSION AGREEMENT IN RESPECT OF THE ABOVE PERSONS AND ALSO SUBMITTED THE IR PANS AND COPIES-OF ACKNOWLEDGEMENT OF INCOME-TAX RETURNS SUBMITTED BY THEM. THE ASSESSEE CLAIMED THAT THE SALES COMMISSIONS HAVE BEEN PAID T O THEM AS PER TERMS OF THE AGREEMENTS AND IS ALLOWABLE AS BUSINESS EXPENSES. (B) IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR I. E . IN ASSTT.YEAR 2010-11, TOTAL SALES COMMISSION WAS CLAIMED AT RS.6,50,000/-. BUT DURING THE YEAR UNDER CONSIDERATION, THE SAME WAS CLAIMED AT RS.L0,94,500 /-. DURING THT COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO G IVE THE REASON FOR INCREASE IN SALES COMMISSION EXPENSES. THE ASSESSEE CLARIFIE D THAT THE AMOUNT OF COMMISSION IS BASED ON SALES ACHIEVED BY THE PERSON S. TOTAL TURNOVER DURING THE ASSTT.YR. 2011-12 IS TO THE TUNE OF RS. 14.91 CRORE AS COMPARED TO THE TOTAL TURN OVER OF RS.5.62 CRORE PERTAINING TO ASSTT.YR. 2010- 11. THERE IS 165% INCREASE IN SALES DURING THE ASSTT.YR. 2011-12 AS COMPARED TO T HAT IN ASSTT.YR. 2010-11. IT ALSO EMPHASIZED THAT RATIO OF SALES COMMISSION TO T HE TOTAL SALES IS 0.734% IN ASSTT.YR. 2011-12 WHEREAS THE SAME WAS AT 1.156% IN ASSTT.YR. 2010-1 I. THUS THERE IS NO INCREASE IN SALES COMMISSION EXPENSES I F SALES FOR BOTH THE YEARS ARE TAKEN INTO COUNT. (C) ASSESSEE'S SUBMISSIONS ON THE ISSUE HAS BEEN CO NSIDERED CAREFULLY. SMT. SARLABEN PRAVIN SHAH IS THE WIFE OF SRI PRAVINBHAI B SHAH. THE ASSESSEE HAS ALSO CLAIMED SALES COMMISSION OF RS. 1,58,500/- IN THE N AME OF SRI PRAVIN B SHAH. ITA NO. 632/ AHD/2018 . A.Y. 2011-12 4 THUS, THE ASSESSEE HAS CLAIMED SALES COMMISSION EXP ENSES IN THE NAMES OF BOTH HUSBAND - SRI PRAVINB SHAH AND HIS WIFE -SMT. SARLA BEN P SHAH. THE DETAILS OF WORK ATTENDED BY SMT. SARLABEN P SHAH WAS NOT GIVEN BY THE ASSESSEE VIZ. NAMES OF THE PERSONS CONTACTED BY HER FOR SALES PURPOSES, SALES ACHIEVED BY HER, DETAILS OF TRAVELS MADE BY HER. SHE WAS ALSO NOT PRODUCED F OR EXAMINATION. THUS THE ASSESSEE COULD NOT JUSTIFY CLAIM OF SALES COMMISSIO N EXPENSES IN THE NAME OF SMT. SARLABEN P SHAH WITH COGENT MATERIAL EVIDENCES. HEN CE, CLAIM OF SALES COMMISSION EXPENSES IN THE NAME OF SMT. SARLABEN P SHAH IS DISALLOWED AND ACCORDINGLY, AN ADDITION OF RS. 1,56,200/-IS MADE T O THE TOTAL INCOME OF THE ASSESSEE. (D) THE ASSESSEE HAS CLAIMED SALES COMMISSION EXPENSES OF RS.2,00,000/- IN THE NAME OF SMT. FALGUNIBEN A RAJYAGURU. THE DETAIL S OF WORK ATTENDED BY SMT. FALGUNIBEN A RAJYAGURU WAS NOT GIVEN BY THE ASSESSE E VIZ. NAMES OF THE PERSONS CONTACTED BY HER FOR SALES PURPOSES, SALES ACHIEVED BY HER, DETAILS OF TRAVELS MADE BY HER ETC. SHE WAS ALSO NOT PRODUCED FOR EXAM INATION. MOREOVER, THE ASSESSEE HAS ALSO CLAIMED UNSECURED LOAN FROM SMT. FALGUNIBEN A RAJYAGURU . LOAN OF RS.9,30,000/- IS CLAIMED TO HAVE BEEN TAKEN FROM SMT. FALGUNIBEN A RAJYAGURU DURING THE YEAR UNDER CONSIDERATION. ONLY THE AMOUNT OF TDS OF RS.4,671/- ON INTEREST HAS SHOWN TO HAVE BEEN PAID OUT THE SAID LOAN. AT ONE HAND THE ASSESSEE IS PAYING CERTAIN AMOUNTS TO SMT. FALGUNIBEN A RAJYAGURU IN THE FORM OF SALES COMMISSION AND AT THE OTHER HAND IT IS RECEIVING BACK THE SAME IN GUISE OF UNSECURED LOANS FRORN HER. THUS, GENUIN ENESS OF THE CLAIM OF SALES COMMISSION IN THE NAME OF SMT. FALGUNIBEN A RAJYAGU RU IS DOUBTFUL. HENCE, CLAIM OF SALES COMMISSION EXPENSES IN THE NAME OF SMT. FA LGUNIBEN A RAJYAGURU IS DISALLOWED AND ACCORDINGLY, AN ADDITION OF RS.2,00, 000/- IS MADE TO THE TOTAL INCOME OF THE ASSESSEE. PROPORTIONATE INTEREST OF R S.36,000/- @18% P.A. IS ALSO DISALLOWED AND FURTHER ADDITION OF RS.36,000/- IS ALSO MADE TO THE TOTAL INCOME OF THE ASSESSEE. (E) THE ASSESSEE HAS CLAIMED SALES COMMISSION EXPENSES OF RS. 1,75,000/- IN THE NAME OF SRI HIMANSHU BHAVSAR. THE ASSESSE E HAS CLAIMED UNSECURED LOAN FROM SRI HIMANSHU BHAVSAR AND HIS WIFE SMT. ISHA H BHAVSAR. LOAN OF RS.3,92,500/- IS CLAIMED TO HAVE BEEN TAKEN FROM SR I HIMANSHU BHAVSAR AND RS.2,05,000/- FROM ISHA BHAVSAR DURING THE YEAR UND ER CONSIDERATION. ONLY THE AMOUNT OF TDS OF RS. 1,984/- ON INTEREST HAS SHOWN TO HAVE BEEN PAID OUT THE SAID LOAN. AT ONE HAND THE ASSESSEE IS PAYING CERTA IN AMOUNTS TO SRI HIMANSHU BHAVSAR IN THE FORM OF SALES COMMISSION AND AT THE OTHER HAND IT IS RECEIVING BACK THE SAME IN GUISE OF UNSECURED LOANS FROM HIM. THUS , GENUINENESS OF THE CLAIM OF ITA NO. 632/ AHD/2018 . A.Y. 2011-12 5 SALES COMMISSION IN THE NAME OF SRI HIMANSHU BHAVSA R IS DOUBTFUL. HENCE, CLAIM OF SALES COMMISSION EXPENSES IN THE NAME OF SRI HIM ANSHU BHAVSAR IS DISALLOWED AND ACCORDINGLY, AN ADDITION OF RS. 1,75,000/-IS MA DE TO THE TOTAL INCOME OF THE ASSESSEE. PROPORTIONATE INTEREST OF RS.31,500/- @18 % P.A IS ALSO DISALLOWED AND FURTHER ADDITION OF RS.31,500/- IS ALSO MADE TO THE TOTAL INCOME OF THE ASSESSEE. 4. AND MADE A DISALLOWANCE OF SALES COMMISSION AND IN TEREST TO THE TUNE OF RS. 5,98,500/-. 5. AGAINST THE DISALLOWANCE OF COMMISSION EXPENSES, AS SESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO CONFIRME D THE ACTION OF THE A.O. THEREAFTER AGREED WITH THE ORDER OF LD. CIT(A), ASS ESSEE HAS FILED A RECTIFICATION APPLICATION U/S.154 DATED 10.10.2014 STATING THAT P REDECESSOR OF THE LD. CIT(A) HAS NOT CONSIDERED SUBMISSION OF THE LD. A.R. FILED ON BEHALF OF THE ASSESSEE. BUT LD. CIT(A) ALSO CONFIRMED THE ACTION OF THE ASS ESSING OFFICER. 6. THERE IS A DELAY OF 5 DAYS IN FILING OF APPEAL BY T HE ASSESSEE. IN SUPPORT OF ITS CONTENTION, ASSESSEE MOVED AN APPLICATION SUPPORTED BY AN AFFIDAVIT, WE ARE SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSE E AND CONDONE THE DELAY. 7. NOW IMPUGNED ORDER BEFORE US IS U/S. 251 OF THE ACT WHICH WAS PASSED PURSUANT TO AN APPLICATION U/S. 154 OF THE ACT. 8. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. LD. CIT(A) HAS HELD THAT AT ONE HAND ASSESSEE HAS GIVEN COMMIS SION TO FOLLOWING THREE PERSONS: NAME AMOUNT OF COMMISSION SMT. SARLABEN PRAVIN SHAH RS.L,56,200/- ITA NO. 632/ AHD/2018 . A.Y. 2011-12 6 SMT. FALGUNI A RAJYAGURU RS.2,00,000/- SRI HIMANSHU BHAVSAR RS. 1,75,000/- 9. AND ON THE OTHER HAND HAS TAKEN THE AMOUNT FROM THE M AND HAS PAID THE INTEREST @ 18% PER ANNUM AND DOUBTED THE TRANSACTIO NS. 10. IN THE CASE OF SMT. SARLABEN PRAVIN SHAH A COMMISSI ON OF RS. 1,56,200/- WAS PAID. IN THE CASE OF SMT. FALGUNIBENA. RAJYAGURU S ALES COMMISSION WAS PAID OF RS. 2,00,000/- AND IN THE CASE OF SHRI HIMANSHU BHA VSAR SALES COMMISSION WAS PAID OF RS. 1,75,000/-. FACTS AND CIRCUMSTANCES OF ALL COMMISSIONS ARE SAME. ASSESSEE CONTENDED THAT HE HAS SIGNED AN AGRE EMENT TO THE EXTENT THAT AS AND WHEN THEY BECOME INSTRUMENTAL IN PROVIDING THE BUSINESS OF TEXTILE YARN IN LIEU OF THAT ASSESSEE WILL PAY COMMISSION TO THEM. AND IN SUPPORT OF ITS CONTENTION, ASSESSEE HAS FILED: 1. DETAILS OF SERVICES PROVIDED BY THE PARTIES TO W HOM COMMISSION PAYMENTS ARE MADE. 2. DETAILS OF CLIENTS ARRANGED BY THESE PARTIES. 3. COPIES OF AGREEMENTS ENTERED INTO WITH THE PARTI ES. COPIES OF CORRESPONDENCE MADE WITH THESE PARTIES. 5. BASIS OF COMMISSION PAYMENT. 6. COPIES OF CONFIRMATIONS FROM PARTIES AND ASSESSE E HAS ALSO DEDUCTED TDS U/S. 194H. 11. AND DURING THE YEAR UNDER CONSIDERATION, THE TOTAL SALES WAS EFFECTED TO THE AMOUNT OF RS. 149150840/-. ASSESSEE STATED THAT IN SUCCEEDING YEAR ALSO SIMILAR COMMISSIONS WERE PAID TO THE SAME PARTIES ALONG WIT H OTHERS AND DEPARTMENT HAS NOT RAISED ANY OBJECTION. REGARDING RENDERING O F SERVICES, THE ASSESSEE HAS ITA NO. 632/ AHD/2018 . A.Y. 2011-12 7 PROVIDED THE RELEVANT EVIDENCES/INFORMATION OF THE PARTIES TO WHOM THE SALES WERE MADE THROUGH THE AGENT HOWEVER, THE A.O. HAS N OT CONTRADICTED THESE FACTS AND EVEN NO ENQUIRY HAS BEEN MADE FROM SUCH P ARTIES. 12. SECTION 37(1 ): ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTION 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXP ENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. 13. IN OUR CONSIDERED OPINION, THAT APPELLANT HAS PAID COMMISSION IN ORDER TO FETCH BUSINESS TO ALL THREE PERSONS AND WE REVERSE THE OR DER OF THE LD. CIT(A) AND DIRECT LD. A.O. TO DELETE THE ADDITIONS. 14. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 09- 12- 2019 SD/- SD/- (AMARJIT SINGH) (MAHAVIR PRASA D) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 09/12/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD