HITESH RAMNIKALAL METHA, MUMBAI V. INCOME TAX OFFICE, 19(1)(5), MUMBAI

ITA 65/MUM/2023

AI Insights

The case involves Hitesh Ramniklal Mehta, the appellant, who appealed against the order of the CIT(A) confirming the AO's disallowance of a commission provision of Rs.13,63,255/- for AY 2013-14. The commission was related to services provided by M/s. Metal Trading Company and M/s. Echelon Metal Pvt. Ltd., which helped the appellant achieve significant business turnover in his first year of operation in importing and selling scrap metal. The AO disallowed the commission deduction due to lack of evidence of payment, a decision upheld by the CIT(A). The appellant argued that the commission was later offered as income in AY 2015-16, and thus, should not be taxed again, leading to the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300107 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-03-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 08-01-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM आयकर अपील सं/ I.T.A. No.65/Mum/2023 (निर्धारण वर्ा / Assessment Year: 2013-14) Hitesh Ramniklal Mehta 2, Keshav Niwas, 20 Nepean Sea Road, Mumbai- 400026. बिधम/ Vs. ITO-19(1)(5) Matru Mandir, Room No. 215, Tardeo Mumbai- 400007. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AAUPM8724H (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) सुनवाई की तारीख / Date of Hearing: 31/03/2023 घोषणा की तारीख /Date of Pronouncement: 25/05/2023 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Ld. CIT(A)/NFAC, Delhi dated 11.11.2022 for AY. 2013-14. 2. The main grievance of the assessee is against the action of the Ld. CIT(A) confirming the action of the AO disallowing provision of Rs.13,63,255/- viz, commission payable on sale of Rs.3,43,20,981/- (shown as outstanding commission) which has been added in this year; and in the alterative, since the deduction claimed of Rs.13,63,255/- didn’t materialize, assessee has written off the same, the ibid commission was offered to tax in the year AY. 2015-16 as income in P & L Account, so pleads deletion of addition. 3. Brief facts are that the assessee is engaged in the business of importing scrap metal from foreign country (USA etc.) and selling the same in India. The AO noted that the assessee had claimed expenditure Assessee by: Shri Hitesh Mehta (Assessee in person) Revenue by: Shri Anil Gupta ITA No.65/Mum/2023 A.Y. 2013-14 Hitesh Ramniklal Mehta 2 (provision of commission income payable) to the tune of Rs.13,63,255/-. On being confronted by the AO, the assessee replied that this was the first year of business and assessee was able to get its turnover of more than of Rs.3,43,20,981/- only because of the support of the two major parties M/s. Metal Trading Company (MTC) and M/s.Echelon Metal Pvt. Ltd. (EMPL) (refer page no. 1 of PB); and for the support/services rendered, assessee as per the custom in vogue made a provision to give commission for the business/high turnover. However, since the commission could not be disbursed to the parties before the finalization of accounts, the assessee showed it as provision for commission payable to the tune of Rs.13,63,255/-. However, the AO did not accept the claim of the assessee because no evidences were submitted by the assessee as proof of payment of commission. So it was disallowed, which action of the AO was confirmed by the Ld. CIT(A). Aggrieved, by the action of the Ld. CIT(A), the assessee is before this Tribunal. 4. I have heard both the parties and perused the records. The main plea of the assessee is that he started this business of importing metal scrap from USA and since this was the first year of retail business of assessee in metal scrap, and assessee was able to book sales/ turnover of more than Rs.3,43,20,981/- which was due to the service rendered mainly by two parties viz M/s. Metal Trading Company (MTC) and M/s.Echelon Metal Pvt. Ltd. (EMPL). And for the services rendered to bag the business from the two concerns, the assessee booked commission to the tune of Rs.13,63,255; and since payment didn’t ITA No.65/Mum/2023 A.Y. 2013-14 Hitesh Ramniklal Mehta 3 materialize before the financial were drawn, the same was shown as provision for commission (payable as outstanding). According to assessee, from the subsequent years, the business of assessee started declining and therefore taking note of the difficulties of assessee those parties (agents of two concerns) refused to take the commission i.e. Rs.13,63,255/-. So the assessee offered the same in the profit and loss account for AY. 2015-16 and offered it for tax (Rs.13,63,255/-) which fact was brought to my notice and is evident from perusal of page no. 29 of the PB. Therefore, according to the Ld. AR, since there was cessation of liability; the assessee had offered as income in subsequent AY. 2015-16, which was claimed as deduction/expenditure in the relevant AY. 2013-14. Therefore, Ld. AR prays that the deduction claimed for AY. 2013-14 of commission of Rs.13,63,255/- be allowed taking into consideration the aforesaid facts. 5. Per contra, the Ld. DR for the department submitted that in this year, the assessee had claimed to have incurred commission expense of Rs.13,63,255/- but since no evidence of making such a payment could be shown to the AO, the same was disallowed. However, the assessee is now claiming that it has offered the same/expenditure claimed in AY. 2013-14 for taxation in AY. 2015-16 which should be appreciated in the light of the fact that since assessee’s claim of expenditure was not genuine as AO disallowed it. So, it is an afterthought and should not be allowed by taking note of the subsequent year developments. ITA No.65/Mum/2023 A.Y. 2013-14 Hitesh Ramniklal Mehta 4 6. In his rejoinder, the assessee submitted that in subsequent assessment year, the M/s. Metal Trading Company (MTC) and M/s.Echelon Metal Pvt. Ltd. (EMPL) both of them started importing directly from the foreign country and did not use the services of the assessee. And therefore, the assessee did not get any business from both these concerns. And therefore, assessee changed its role from importing to trading and brokerage, which means that since the assessee has license for importing the metal scrap, the retailers started purchasing the scrap from foreign countries in the name of the assessee; and the assessee got only 1 or 2 percentage which is very negligible. Be that as it may, the assessee got into the business of import of scrap metal in this assessment year (AY. 2013-14) which is the first year of business. And assessee could procure sales of metal scrap to the tune of Rs.3,43,20,981/- from two concerns (supra) and for the services rendered for facilitating the sales, assessee had made provision of commission payable of Rs.13,63,255/-; and claimed deduction of the same in its profit and loss account for the relevant AY. 2013-14; and during subsequent year when assessee didn’t pay the same (commission), assessee has offered the same for taxation in AY. 2015-16 which fact is evident from page 29 of profit and loss account for AY. 2015-16. In such a scenario, the deduction claimed for AY. 2013-14 is pleaded to be allowed, since the AO has not questioned the genuinety of the commission payable and will tantamount to double taxation. Therefore, the impugned order of the Ld. CIT(A) is set aside and the matter restored back to the file of the ITA No.65/Mum/2023 A.Y. 2013-14 Hitesh Ramniklal Mehta 5 AO with a direction that if the assessee has offered the commission of Rs.13,63,255/- in AY 2015-16 for taxation, the claim of deduction for AY. 2013-14 be allowed. 7. In the result, all the appeals of the assessee is allowed for statistical purposes. Order pronounced in the open court on this 25/05/2023. Sd/- (ABY T. VARKEY) JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated : 25/05/2023. Vijay Pal Singh, (Sr. PS) आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधयक िंजीकधर /(Dy./Asstt. Registrar) आयकर अिीलीय अनर्करण, मुंबई / ITAT, Mumbai 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 4. आयकर आयुक्त / CIT 5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. ITA No.65/Mum/2023 A.Y. 2013-14 Hitesh Ramniklal Mehta 6