Saraf Merchandise Pvt Ltd., CHENNAI V. ITO, CHENNAI

ITA 659/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6453 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 17-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN IRS
• Assessee Lawyers: ANANDD BABUNATH FCA LLB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B (SMC) BENCH : CHENNAI . , [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO.659/MDS/2017 / ASSESSMENT YEAR : 2012-2013 M/S. SARAF MERCHANDISE PRIVATE LTD, NO.91/46, KMS PLAZA, THAMBU CHETTY STREET, CHENNAI 600 001. [PAN AAHCS 4599N] VS. THE INCOME TAX OFFICER, CORPORATE WARD 6(1) CHENNAI. ( !' / APPELLANT) ( #$!' /RESPONDENT) / APPELLANT BY : SHRI. ANANDD BABUNATH, FCA, LLB /RESPONDENT BY : SHRI. B. SAGADEVAN, IRS, JCIT. /DATE OF HEARING : 09-08-2017 !' /DATE OF PRONOUNCEMENT : 10-08-2017 % / O R D E R IN THIS APPEAL FILED BY THE ASSESSEE, WHICH IS DIR ECTED AGAINST AN ORDER DATED 16.01.2017 OF THE LD. COMMISSIONER O F INCOME TAX (APPEALS)-15, CHENNAI, IT IS AGGRIEVED ON A DISALLO WANCE OF B30,94,797/- CLAIMED AS COMMISSION, WHICH DISALLOWA NCE WAS CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (AP PEALS). ITA NO. 659/MDS/2017. :- 2 -: 2. SHRI. ANANDD BABUNATH, THE AUTHORIZED REPRESENTATIV E OF THE ASSESSEE HAS FILED AN ADJOURNMENT PETITION. HOWEVE R, THE REASONS SHOWN FOR SEEKING THE ADJOURNMENT IS NOT SATISFACTO RY AND THEREFORE THE ADJOURNMENT PETITION IS DISMISSED. 3. FACTS OF THE CASE ARE THAT ASSESSEE A TRADER OF DE PB LICENSE HAD FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASS ESSMENT YEAR DISCLOSING INCOME OF B13,64,860/-. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE LD. ASSESSING OFFI CER THAT AGAINST TURNOVER OF B157.05 CRORES ASSESSEE HAS BOOKED PUR CHASE OF DEPB LICENSES WORTH B155.76 CRORES. AS PER LD. ASSESSIN G OFFICER ONE OF THE MAJOR EXPENDITURE DEBITED IN THE PROFIT AND LOSS A CCOUNT WAS COMMISSION OF B86,64,102/-. LD. ASSESSING OFFICER ENQUIRED WITH THE PARTIES TO WHOM ASSESSEE HAD CLAIMED PAYMENT OF COM MISSION. AS PER LD. ASSESSING OFFICER, REPLIES WERE RECEIVED FROM A LL THE PARTIES BUT THE DETAILS FURNISHED BY THEM INDICATED THAT FEW OF THE M HAD NOT RENDERED ANY SERVICES FOR RECEIVING COMMISSION FROM THE ASSE SSEE. THE LIST OF THOSE PERSONS AS TABULATED BY THE LD. ASSESSING OF FICER IS GIVEN HEREUNDER:- ITA NO. 659/MDS/2017. :- 3 -: SL.NO NAME OF THE PARTY BILL DATE AMOUNT OF COMMISSION B 1 VIVEK GUPTA HUF 23.03.2012 6,70,402 2 DEEPIKA GUPTA 23.03.2012 5,91,688 3 PRIYA KOTHARI 31.03.2012 2,23,869 4 PINKY DEVI 29.03.2012 6,15,417 5 POOJA MODI 29.03.2012 4,06,646 6 PRAKASH KOTHARI 31.03.2012 2,50,297 7 KAUSALYA 31.03.2012 3,36,478 TOTAL 30,94,797 AS PER LD. ASSESSING OFFICER BILLS WERE RAISED BY T HE PERSONS AND PAYMENTS EFFECTED BY THE ASSESSEE DURING THE LAS T WEEK OF THE RELEVANT PREVIOUS YEAR. FURTHER, AS PER THE LD. AS SESSING OFFICER IN THESE CASES, THE LICENSE IDENTIFICATION NUMBERS WER E NOT GIVEN. AS AGAINST THIS, AS PER LD. ASSESSING OFFICER IN THE O THER CASE OF COMMISSION PAYMENTS, THE LICENSE NUMBER ON WHICH SU CH COMMISSION WAS PAID WERE CLEARLY INDICATED. WHEN THIS WAS PUT TO THE NOTICE OF THE ASSESSEE, IT FURNISHED A CALCULATION SHEET AND ALSO SUBMITTED THE DEBIT NOTES ISSUED BY THE ABOVE PARTIES. HOWEVER, AS PER THE ASSESSING OFFICER THE LICENSE NUMBERS REFERRED IN THE DEBIT N OTES WERE IN AN ASCENDING ORDER AND INDICATED THAT THE ABOVE PARTIE S WERE RENDERING SERVICES TO THE ASSESSEE IN A SEQUENTIAL MANNER WH ICH WAS NOT POSSIBLE IN NORMAL CIRCUMSTANCES. THAT APART, AS P ER LD. ASSESSING ITA NO. 659/MDS/2017. :- 4 -: OFFICER ONE OF THE RECIPIENT NAMELY MS. PINKY DEVI HAD NOT FILED HER RETURN OF INCOME AT ALL. HE THUS, REFUSED TO BELI EVE THE VERSION OF THE ASSESSEE IN SO FAR AS B30,94,797/- CLAIMED AS COM MISSION. OUT OF THE TOTAL COMMISSION OF B86,64,102/-, A DISALLOWAN CE OF B30,94,797/- WAS MADE. 4. AGGRIEVED, THE ASSESSEE MOVED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). AS PER ASSE SSEE ALL DETAILS OF THE COMMISSION AND THE CALCULATION SHEET WERE FILED BEFORE THE LD. ASSESSING OFFICER. CONTENTION OF THE ASSESSEE WAS T HAT THE PAYMENTS WERE MADE THROUGH BANKS AND TAXES ALL DEDUCTED AT S OURCE. ASSESSEE POINTED OUT THAT THE COMMISSION EXPENDITURE WAS CLA IMED AT B86.64 LAKHS AGAINST A TOTAL TURNOVER OF B157.05 CRORES. ACCORDING TO THE ASSESSEE, JUST BECAUSE VALUE OF THE LICENSE MENTION ED IN THE DEBIT NOTE AND THE VALUE OF THE LICENSE AS PER LEDGER OF THE BUYER DIFFERED , THE CLAIM OF COMMISSION OUGHT HAVE BEEN DISBELIEVED . LD. COMMISSIONER OF INCOME TAX (APPEALS) SOUGHT A REMAN D REPORT FROM THE LD. ASSESSING OFFICER. THE LD. ASSESSING OFFICE R IN HIS REMAND REPORT DATED 20.12.2016 STATED AS UNDER:- 'I. BASED ON THE SUBMISSIONS OF THE ASSESSEE BEFORE THE LEARNED CIT(A)- 15, OPPORTUNITY WAS GIVEN TO THE AS SESSEE TO FILE DETAILS IN SUPPORT OF THE CLAIM MADE THERETO. THE ASSESSEE WAS ASKED TO CLARIFY THE REASON FOR DIFFERENCE IN T HE VALUE OF THE LICENSE AND THE PURCHASE VALUE OF THE LICENSE. IN RESPONSE, THE ASSESSEE HAS FILED REPLY DATED 19/10/2016. ON V ERIFICATION ITA NO. 659/MDS/2017. :- 5 -: OF INVOICES FOR OEPB LICENSES IT IS NOTICED THAT, F OR ILLUSTRATION PURPOSES, IN THE CASE OF PETRO PLAST INDUSTRIES LTD . INVOICE NO.280/2011-12, THE AMOUNT APPEARING IN THEIR BOOKS OF ACCOUNT IS RS.29,35,951/- WHICH IS REFLECTED IN THE INVOICE UNDER THE BREAK-UP RS.28, 78,383/- PLUS CST @ 2.00% OF RS. 57, 568/-. THIS IS THE VALUE FOR WHICH THE LICENSE IS TRADED. THE LICENSE VALUE APPEARING IN THE INVOICE IS RS. 30,73 ,592/-. THE ASSESSEE IN HIS EXPLANATION STATES THAT ' THE VALUE OF LICENSE IS THE VALUE FOR WHICH THE GOVERNMENT ISSUE THE LICENS E AND THE IMPORTER CAN USE THE SAME VALUE FOR THE IMPORTS OF GOODS. ON CROSS VERIFICATION OF THE LEDGER OF THE PARTY VI Z. M/S. PETRO PLAST INDUSTRIES LTD ALREADY FILED IN THIS OFFICE, THE VALUE OF LICENCE TRADED FOR RS. 29,35,951/- HAS BEEN BOOKED IN THE BOOKS OF ACCOUNT. THIS REPRESENTS THE ACTUAL TRANSA CTION VALUE. SIMILAR VERIFICATION WAS MADE IN CASE OF INVOICE NO . 301/2011- 12. II.THE ASSESSEE CONTENDS THAT THESE ARE OPEN-ENDED LICENSES AND SOLD ACCORDING TO MARKET DEMAND AND HENCE THE SEQUENCE OF NUMBERING VARIES VIS-A-VIS THE DATES. T O VERITY THIS CLAIM, THE ASSESSEE WAS ASKED TO PRODUCE SAMPL ES OF LICENSES HANDLED BY THEM. IN RESPONSE, THE ASSESSEE HAS PRODUCED VARIOUS CATEGORIES OF LICENCES NOMENCLATUR ED VIZ. MERCHANDISE EXPORTS FROM INDIA SCHEME (MEIS); FOCUS PRODUCT SCHEME; VISHESH KRISHI & GRAM UDYOG YOJANA; INCREMENTAL EXPORT INCENTIVISATION SCHEME; STATUS HOLDER INCENTIVE SCRIP;DEPB-POST EXPORT. IT IS APPARENT TH AT THE SCHEMES UNDER WHICH LICENSES ARE DEALT ARE MANIFOLD . ' III.THE NEXT ISSUE IS WHETHER THE COMMISSION PAID W AS GENUINE OR NOT. TO VERIFY THIS DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE CASE OF MS. PINKY DEVI WAS TAKEN A ND DISALLOWED. NOW, DURING THE COURSE OF REMAND PROCEE DINGS, THE ASSESSEE WAS ASKED TO PRODUCE PROOF THAT THE COMMISSION PAID TO THE SEVEN PARTIES WERE GENUINE O R NOT. THE SAME WERE VERIFIED BY ASKING THE ASSESSEE TO FI LE THEIR RETURNS OF INCOME WITH NECESSARY SCHEDULES TO REFLE CT THE RECEIPT OF SUCH COMMISSION PAYMENTS. ASSESSEE HAS F ILED RETURN OF INCOME OF (A) MS. POOJA MODI FOR AY 2012-13 FILED ON 13/09/2012 & COMMISSION RECEIPTS ARE REFLECTED IN T HE R/II; (B) MS. PRIYA KOTHARI FOR AY 2012-13 FILED ON 02/03/2013 & COMMISSION RECEIPTS ARE REFLECTED IN THE R/I; (C) M S. DEEPIKA GUPTA FOR AY 2012-13 FILED ON 03/10/2012 & COMMISSION RECEIPTS ARE REFLECTED IN THE R/I; (D) M/S. VIVEK G UPTA & SONS HUF FOR AY 2012-13 FILED ON 03/10/2012 & COMMISSION ITA NO. 659/MDS/2017. :- 6 -: RECEIPTS ARE REFLECTED IN THE R/I; (E) MR. PRAKASH KOTHARI FOR AY 2012-13 FILED ON 02/03/2013 & COMMISSION RECEIPTS ARE REFLECTED IN THE R/I (F) MS. KAUSA/YA FOR AY 2012-13 FILED ON 13/0912012 & COMMISSION RECEIPTS ARE REFLECTED IN T HE R/I HOWEVER, IN THE CASE OF MS. PINKY DEVI, THE ASSESSE E HAS NOT PRODUCED THE COPY OF RETURN OF INCOME FOR THE AY 20 12-13 IN SUPPORT OF HIS CLAIM. HENCE, THE SAME IS UNSUBSTANT IATED. ' LD. COMMISSIONER OF INCOME TAX (APPEALS) BASED ON T HE ABOVE REMAND REPORT NOTED THAT LD. ASSESSING OFFICER HAD ACCEPTED THE CONTENTION OF THE ASSESSEE EXCEPT IN THE CASE OF MS. PINKY DEVI. DESPITE THIS, THE LD. COMMISSIONER OF INCOME TAX ( APPEALS) SUSTAINED THE WHOLE OF THE DISALLOWANCE, CITING A REASON THAT CONCERNED PARTIES WHO WERE ALL RELATED TO THE DIRECTORS OF THE ASSESS EE COMPANY AND HAD RENDERED SIMILAR SERVICES TO ONLY ONE OTHER PERSON OTHER THAN THE ASSESSEE AND HENCE THE CLAIM COULD NOT BE BELIEVED. 5. NOW BEFORE ME, LD. AUTHORISED REPRESENTATIVE STRONG LY ASSAILING THE ORDERS OF THE LOWER AUTHORITIES SUBMI TTED THAT THE LD. ASSESSING OFFICER HAVING ACCEPTED THE CLAIM OF THE ASSESSEE AS GENUINE IN HIS REMAND REPORT, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) OUGHT HAVE DELETED THE DISALLOWANCE. FU RTHER, ACCORDING TO HIM, EXCEPT SHRI. PRIYA KOTHARI AND SHRI. PRAKAS H KOTHARI AMONG THE NINE COMMISSION AGENTS ALL OTHERS HAD RENDERED COMM ISSION SERVICES TO OTHER PARTIES ALSO. ITA NO. 659/MDS/2017. :- 7 -: 6. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. THE REMAND REPORT OF THE LD. ASSESSING OFFICER GIVEN DURING THE COURSE OF THE PROCEEDINGS BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS BEEN REPRO DUCED BY US AT PARA 4 ABOVE. THE LD. ASSESSING OFFICER HAD REQUI RED THE ASSESSEE TO PROVE THAT PARTIES WERE GENUINE. ASSESSEE HAD FILE D COPIES OF THE TAX RETURNS AND THESE WERE VERIFIED BY LD. ASSESSING OF FICER DURING THE REMAND PROCEEDINGS. HE ALSO FOUND THAT COMMISSION RECEIVED WERE REFLECTED IN SUCH RETURN EXCEPT FOR SMT. PINKY DEVI WHO HAD NOT FILED A RETURN. LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS NOTED THIS FACT AT PARA 18 OF HIS ORDER. THE ONLY REASON WHY THE L D.CIT(A) CONFIRMED THE DISALLOWANCE WAS THAT THE PARTIES HAD RENDERED SERVICES TO ONLY ONE OTHER PERSON APART FROM THE ASSESSEE. IN MY OP INION, WHEN THE PAYMENTS WHERE EFFECTED BY CHEQUES AND THE CONCERN ED PARTIES HAD REFLECTED THE RECEIPTS AS COMMISSION IN THEIR RESPE CTIVE RETURNS, A DISALLOWANCE OUGHT NOT HAVE BEEN MADE, MERELY ON SU SPICION AND SURMISES. EXCEPT FOR PRIYA KOTHARI AND PRAKASH KOT HARI, THE OTHER COMMISSION AGENTS HAD ADMITTEDLY RENDERED SERVICES ATLEAST TO ONE OTHER PARTY. THIS IS CLEAR FROM THE TABULATION GI VEN BY THE LD. ITA NO. 659/MDS/2017. :- 8 -: COMMISSIONER OF INCOME TAX (APPEALS) AT PARA 25 WHI CH IS REPRODUCED HEREUNDER:- SR. NO NAME OF COMMISSION AGENT NAME OF CREDITOR AS PER 26AS AMOUNT CREDITED IN 26AS NATURE OF PAYMENT AS PER 26AS EDUCATION AL QUALIFICATI ON WO RK EXPERIENCE 1 VIVEK GUPTA & SIBS (HUF) BINDAL NITIN 2,00,000 U/S. 194H NIL NIL 2 -- DO -- SARAF MERCHANDISE INDIA PVT. LTD, THE APPELLANT 6,70,402 U/S. 194H NIL NIL 3 POOJA MODI -- DO -- 4,04,646 U/S. 194H GRADUATE NIL 4 -- DO -- SUMAN MODI 1,87 ,790 U/S. 192 (SALARY) -- NIL 5 KOUSHALYA MODI ANIL MODI 96,000 U/S. 194A (INTEREST) M.COM NIL 6 DIPIKKA GUPTA BINDAL NITIN 2,00,000 U/S. 194H GRADUATE NIL 7 -- DO -- SARAF MERCHANDISE INDIA PVT. LTD, THE APPELLANT 5,91,698 U/S. 194H -- NIL 8 PRIYA KOTH ARI -- DO -- 2,48,743 U/S. 194H -- DO -- NIL 9 PRAKASH KOTHARI -- DO -- 2,50,297 U/S. 194H -- DO -- NIL AS FOR THE ALLEGED COMMISSION PAID TO MS. PINKY DE VI, I FIND THAT RETURN WAS FILED BY HER ONLY AFTER INSTITUTION OF THE APPEAL BY THE ASSESSEE BEFORE THE LD.CIT(A). THE ASSESSEE ALSO A DMITTED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT MS. P INKY DEVI HAD NO EXPERIENCE IN COMMISSION AGENCY. CONSIDERING ALL T HESE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT DISALLOWANCE OF COMMISSION SHOULD HAVE BEEN LIMITED TO THE PAYMENT CLAIMED TO HAVE EFFECTED TO MS. PINKY DEVI WHICH COMES TO B6,15,417 /-. I THEREFORE ITA NO. 659/MDS/2017. :- 9 -: HAVE NO HESITATION IN DELETING THE DISALLOWANCE OF B 24,79,380/- OUT OF THE TOTAL DISALLOWANCE OF B30,94,797/-. THE DISALL OWANCE IS LIMITED TO B6,15,417/- CLAIMED TO HAVE BEEN PAID TO MS. PINKY DEVI. ORDERED ACCORDINGLY. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 10TH DAY OF AU GUST, 2017, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 10TH AUGUST, 2017 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,- / CIT(A) 5. )./ 0 / DR 2. / RESPONDENT 4. + / CIT 6. /12 / GF