PRAMOD AGARWAL, Jaipur V. ACIT, Jaipur

ITA 665/JPR/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6149 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 17-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SEEMA MEENA
• Keywords: Retrospective amendment; Wrong claim
• Section: 131

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 665/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12 SHRI PRAMOD AGARWAL D-20, LAL BHADUR NAGAR, JLN MARG, JAIPUR. CUKE VS. THE ACIT, CIRCLE-5, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABHPA 3213 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ R ESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SMT. SEEMA MEENA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 21/03/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 28/05/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 11.04.2016 OF LD. CIT(A), JAIPUR FOR THE ASSESSMENT YEAR 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE LD. AO ERRED IN DISALLOWING RS. 317131.00 AND SIMULTANEOUS LY LD. CIT(A) ERRED IN ENHANCING THE DISALLOWANCE AT RS. 823271.0 0 WITHOUT GOING THROUGH ALL THE FACTS AND EVIDENCES AND DISAL LOWANCE IS ITA NO. 665/JP/2016 SHRI PRAMOD AGARWAL VS. ACIT 2 BASED ON ASSUMPTION AND PRESUMPTION, WHICH IS UNJUS TIFIED AND LIABLE TO BE QUASHED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E LD. AO ERRED IN DISALLOWING THE LIFT MAINTENANCE EXPENSES OF RS. 60000.00 U/S 40A(IA) AND SIMULTANEOUSLY LD. CIT(A) ERRED IN SUST AINING THE DISALLOWANCE WITHOUT GOING THROUGH THE SUBMISSION O F ASSESSEE AND RECENT DEVELOPMENT OF LAW, WHICH IS UNJUSTIFIED AND LIABLE TO BE QUASHED. 2. GROUND NO. 1 IS REGARDING DISALLOWANCE OF COMMIS SION PAID. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G AND TRADING OF GEMS AND JEWELLERY BESIDES CARRYING OUT THE JOB WOR K OF JEWELLERY IN THE NAME AND STYLE OF M/S PUNITA HANDICRAFTS. UPTO PREC EDING YEAR, THE ASSESSEE WAS ENGAGED IN JOB WORK OF JEWELLERY MANUF ACTURING AND 95% OF THE TURNOVER IS FROM JOB WORK ONLY. HOWEVER, IN CURRENT YEAR, IT IS 7.5% OF TOTAL TURNOVER. THUS, THE ASSESSEE STATED T HAT THE NATURE OF BUSINESS HAS BEEN CHANGED FROM JOB WORK TO TRADING OF JEWELLERY MANUFACTURING BY HIM, FOR WHICH THE ASSESSEE HAS SH OWN COMMISSION EXPENSES OF RS. 17,69,238/- PAID TO 8 PARTIES. THE AO ACCEPTED THE PAYMENT OF COMMISSION TO SHRI TRILOK JHALANI AND SH RI ADITYA JAIN TO WHOM THE COMMISSION IS PAID @ 2% OF THE SALES AMOUN T. HOWEVER IN RESPECT OF THE REMAINING 6 PERSONS, NAMELY MR. GAUT AM MEHTA, GAUTAM MEHTA (HUF), VISHNU PRAKASH AGARWAL, MADHU JAIN, KA VITA AGARWAL AND SUNIT KUMAR GARG (HUF) THE COMMISSION WAS PAID FOR SALES MADE TO A ITA NO. 665/JP/2016 SHRI PRAMOD AGARWAL VS. ACIT 3 SINGLE PARTY, I.E. M/S CREATIVE BEADS, USA. ACCORDI NGLY, THE AO ISSUE SUMMONS U/S 131 OF THE ACT TO THESE PERSONS AND REC ORDED THE STATEMENT U/S 131 OF THE ACT. AFTER RECORDING THE S TATEMENT THE AO OBSERVED THAT THESE 6 PERSONS BELONG TO 2-3 FAMILIE S AND THE NATURE OF SERVICE WAS NOT SPECIFIED. SHRI VISHNI PRAKASH AGAR WAL IN HIS STATEMENT STATED THAT SOME BILLS WERE RAISED IN THE NAME OF W IFE SMT. KAVITA AGARWAL TO DIVIDE THE COMMISSION. SINCE, ALL THESE 6 PERSONS WERE PAID AGAINST THE SERVICE FOR INTRODUCING ONLY ONE SINGL E PARTY I.E. M/S CREATIVE BEADS, USA THEREFORE, THE AO DISALLOWED 50 % OF THE COMMISSION PAID TO SMT. KAVITA AGARWAL AND 15% OF T HE TOTAL COMMISSION PAID TO OTHER PERSONS RESULTING INTO DIS ALLOWANCE OF RS. 3,17,131/-. ON APPEAL, THE LD. CIT(A) ENHANCED THE DISALLOWANCE BY CONSIDERING THE FACT THAT THE COMMISSION PAID TO TW O PERSONS NAMELY ADITYA JAIN AND TRILOK JHALANI IS @ 2% OF THE SALES WHEREAS THE COMMISSION PAID TO THESE 6 PERSONS WAS @ 4%. ACCORD INGLY, THE LD. CIT(A) HAS DISALLOWED 50% OF THE COMMISSION PAID TO 5 PERSONS AND THE ENTIRE COMMISSION PAID TO SMT. KAVITA AGARWAL. AGGRIEVED BY THE IMPUGNED ORDER OF THE LD. CIT(A) THE ASSESSEE FILED THE PRESENT APPEAL. 3. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT DURING THE COURSE OF ASSESSMENT PROCEEDING, THE AO RECORDE D THE STATEMENT OF ITA NO. 665/JP/2016 SHRI PRAMOD AGARWAL VS. ACIT 4 THESE PERSONS WHEREIN THEY HAVE ADMITTED THE SERVIC E RENDERED TO THE ASSESSEE FOR SALES TO M/S CREATIVE BEADS, USA. THUS , THE AO HAS NOT DISPUTED THE FACT THAT THE GROUP OF 6 PERSONS HAVE ARRANGED SALES TO M/S CREATIVE BEADS, USA AND THUS ALLOWED THE COMMIS SION PAID THOUGH ADOPT DISALLOWANCE OF 15% WAS MADE EXCEPT IN THE C ASE OF SMT. KAVITA AGARWAL DISALLOWANCE WAS 50%. ONCE THE SERVICE REND ERED BY THESE PERSONS WAS ACCEPTED THEN THE PAYMENT OF COMMISSION CANNOT BE DISALLOWED OR RESTRICTED AS THE CASE SAME IS NOT FA LLING IN THE CATEGORY OF SECTION 40A(2)(B) OF THE ACT. THUS, THE COMMISSION EXPENDITURE CANNOT BE DISALLOWED ON THE BASIS OF REASONABILITY OF THE EXPENSES. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION O F HONBLE SUPREME COURT IN CASE OF J.K. WOLLEN MANUFACTURING VS. CIT 72 ITR 612 . HE HAS ALSO RELIED UPON THE DECISION OF THE HONBLE CA LCUTTA HIGH COURT IN CASE OF CIT VS. RAJARANI EXPORT PVT. LTD. 361 ITR 152 . 4. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON TH E ORDER OF THE LD. CIT(A) AND SUBMITTED THAT IT IS A CASE OF BOGUS CLA IM TO AVOID THE TAX AS THE GROUP OF 6 PERSONS CLAIMED TO HAVE ARRANGED THE SALES OF THE ASSESSEE ONLY TO ONE PARTY M/S CREATIVE BEADS, USA. DURING THE ASSESSMENT PROCEEDING SHRI VISHNU PRAKASH AGARWAL H AS ADMITTED THE FACT THAT DUE TO THE HIGH AMOUNT OF COMMISSION HE H AS RAISED SOME OF ITA NO. 665/JP/2016 SHRI PRAMOD AGARWAL VS. ACIT 5 THE BILLS IN THE NAME OF HIS WIFE. THUS, IT IS ADMI TTED CASE OF BOGUS CLAIM WITHOUT RENDERING ANY SERVICE. FURTHER, THE A SSESSEE HAS PAID COMMISSION @ 2% TO THE OTHER TWO PERSONS WHERE AS T HE COMMISSION WAS PAID @ 4% TO THESE 6 PERSONS. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS PAID THE COMMISSION TO 8 PERSONS AS UNDER:- SR. NO. NAME OF THE PARTY COMMISSION PAID REMARKS 1. GAUTAM SINGH MEHTA 331630 FOR SALES TO M/S CREATIVE BEADS (USA) 2. VISHNU PRAKASH AGARWAL 228645 FOR SALES TO M/S CREATIVE BEADS (USA) 3. KAVITA AGARWAL 200426 FOR SALES TO M/S CREATIVE BEADS (USA) 4. MADHU JAIN 228141 FOR SALES TO M/S CREATIVE BEADS (USA) 5. TRILOK JHALANI 54 794 FOR SALES TO M/S BEAUTY GEMS & JEWELLERY 6. GAUTAM SINGH MEHTA HUF 175694 FOR SALES TO M/S CREATIVE BEADS (USA) 7. ADITYA JAIN 268327 FOR SALES TO M/S GOLDEN STONE (USA) 8. SUNIL KUMAR GARG HUF 281581 FOR SALES TO M/S CREATIVE BEADS (USA) TOTAL 1 7,69,238/ - OUT OF THESE 8 PERSONS THE AO ACCEPTED THE COMMISSI ON PAID TO SHRI TRILOK JHALANI AND ADITYA JAIN TO WHOM THE ASSESSEE PAID THE COMMISSION @ 2%. AS IT IS CLEAR FROM THE DETAILS TH AT THE REMAINING 6 ITA NO. 665/JP/2016 SHRI PRAMOD AGARWAL VS. ACIT 6 PERSONS WERE PAID COMMISSION FOR SALES TO ONLY ONE PARTY I.E. M/S CREATIVE BEADS, USA. THE AO RECORDED THE STATEMENT OF THESE PERSONS U/S 131 OF THE ACT AND NOTED THAT THESE GROUP OF 6 PERSONS BELONG TO 2- 3 FAMILIES AND SOME OF THEM ARE HUSBAND AND WIFE, S HRI VISHNU PRAKASH AGARWAL IN HIS STATEMENT HAS CLEARLY ADMITTED THAT SOME OF THE BILLS WERE RAISED IN THE NAME OF WIFE SMT. KAVITA AGARWAL WHICH GOES TO THE SHOW THE REAL NATURE OF CLAIM AND MODUS OPERANDY AS WELL AS THE UNDERLINE PURPOSE OF SHOWING COMMISSION TO THESE 6 PERSONS INSTEAD OF ONE OR TWO PERSONS. IT APPEARS THAT THE ASSESSEE PA ID THE COMMISSION TO THESE PERSONS IN ORDER TO MINIMIZE THE TAX LIABI LITY WHEREAS THE COMMISSION WAS PAID AGAINST THE SALES TO ONLY ONE P ARTY. THEREFORE, THE COMMISSION PAID TO SMT. KAVITA AGARWAL IS WITHO UT ANY SERVICE RENDERED BY HER. HENCE, THE ENTIRE CLAIM OF THE ASS ESSEE IS NOT FREE FROM DOUBT OF GENUINENESS. THE AO TOOK THE LENIENT VIEW AND DISALLOWED ONLY 15% OF THE COMMISSION PAID TO 5 PER SONS AND 50% PAID TO SMT. KAVITA AGARWAL WHEREAS THE LD. CIT(A) AFTER CONSIDERING THE CASE HAS ALLOWED THE CLAIM OF COMMISSION @ 2% OF SA LES TO 5 PERSONS AND DISALLOWED THE ENTIRE COMMISSION PAID TO SMT. K AVITA AGARWAL. WE FIND THAT ONCE THIS FACT WAS ADMITTED THAT SMT. KAV ITA AGARWAL DID NOT RENDER ANY SERVICE THEN THE PAYMENT OF COMMISSION T O HER IS NOT ITA NO. 665/JP/2016 SHRI PRAMOD AGARWAL VS. ACIT 7 ALLOWABLE CLAIM. ACCORDINGLY, IN VIEW OF THE FACT A ND CIRCUMSTANCES OF THE CASE WHEN REMAINING OF SERVICE AND CLAIM OF CO MMISSION TO THESE 6 PERSONS IS NOT FREE FROM THE BOGUS CLAIM THEN THE R ESTRICTION OF THE CLAIM @ 2% DOES NOT REQUIRE ANY INTERFERENCE. HENCE , WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LD. CIT (A) QUA THIS ISSUE. 6. GROUND NO. 2 IS REGARDING DISALLOWANCE MADE U/S 40(A)(IA) OF THE INCOME TAX ACT. THE ASSESSEE MADE A PAYMENT OF RS. 60,000/- TOWARDS LIFT MAINTENANCE EXPENSES ON WHICH TAX IS NOT DEDUC TED AT SOURCE. THE AO DISALLOWED THE SAID EXPENSES BY INVOKING THE PRO VISIONS OF SECTION 40(A)(IA) OF THE IT ACT. ON APPEAL, THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE MADE BY THE AO. 7. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT AS PER THE AMENDED PROVISIONS BY FINANCE ACT, 2014 W.E.F. 01.04.2015 THE DISALLOWANCE IS RESTRICTED TO 30% OF THE SUM PAID O R PAYABLE TO A RESIDENT. THUS, HE HAS CONTENDED THAT THAT THE SAID AMENDMENT WAS BROUGHT TO CONFER A BENEFIT TO THE ASSESSEE WITHOUT DISCRIMINATION TO THE OTHER 6 PERSONS OR PUBLIC GENERALLY. THEREFORE, THE PRESUMPTION THAT SUCH LEGISLATION SHOULD BE GIVEN A PURPOSIVE CONSTR UCTION AND SHALL HAVE A RETROSPECTIVE EFFECT. IN SUPPORT OF HIS CONTENTIO N HE HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS. VATIKA ITA NO. 665/JP/2016 SHRI PRAMOD AGARWAL VS. ACIT 8 TOWNSHIP PVT. LTD. 109 DTR 33 AS WELL AS THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL DATED 29.01.2016 IN CASE OF ITA NO. 895/JP/2012. HE HAS ALSO RELIED UPON THE FOLLOWING DECISIONS AS UNDER:- M/S AMRUTA QUARRY WORKS VS. ITO IN ITA NO. 1481/AHD /2013 ORDER DATED 19.07.2016. SMT. KAANTA YADAV VS. ITO IN ITA NO. 6312/DEL/2016 ORDER DATED 12.05.2017. 8. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT WH EN THERE IS NO AMBIGUITY IN THE LANGUAGE OF THE PROVISIONS WHICH I S W.E.F. 01.04.2015 THEREFORE, THE SAME IS PROSPECTIVE IN NATURE AND CANNOT BE GIVEN RETROSPECTIVE EFFECT. SHE HAS RELIED UPON THE ORDER OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE RAISED THE CONTENT ION BEFORE THE LD. CIT(A) THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IS APPLICABLE ONLY ON PAYABLE EXPENSES WHEREAS THE ASSESSEE HAS A LREADY PAID THE SAID AMOUNT AND THEREFORE, NO DISALLOWANCE IS CALLE D FOR. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HONBLE ALLA HABAD HIGH COURT IN CASEOF CIT VS. M/S VECTOR SHIPPING SERVICES (P) LTD. 262 C TR 545 . SINCE THE SAID ISSUE OF PAID OR PAYABLE U/S 40(A) (IA) OF THE ACT HAS ITA NO. 665/JP/2016 SHRI PRAMOD AGARWAL VS. ACIT 9 BEEN FINALLY SETTLED BY THE HONBLE SUPREME COURT I N CASE OF M/S PALAM GAS SERVICE VS. CIT 394 ITR 300 HAS RELIED UPON BY THE LD. DR THEREFORE, TO THAT EXTENT, WE DO NOT FIND ANY ER ROR OR ILLEGALITY IN THE ORDER OF THE LD. CIT(A). NOW BEFORE THE TRIBUNAL TH E ASSESSEE HAS RAISED A FRESH PLEA AND PLACED RELIANCE ON VARIOUS DECISIO NS, THEREFORE THE ISSUE BEING PURELY LEGAL IN NATURE, THE SAME IS SET ASIDE TO THE RECORD OF THE LD. CIT(A) TO ADJUDICATE AS PER THE PROVISIONS OF LAW AND AFTER GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER AS WELL AS THE ASSESSEE. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 28/05/2018 . SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 28/05/2018. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI PRAMOD AGARWAL, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- ACIT, CIRCLE-5, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 665/JP/2016} ITA NO. 665/JP/2016 SHRI PRAMOD AGARWAL VS. ACIT 10 VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR