SHRI RAM RATAN JOSHI, Jaipur V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4, Jaipur

ITA 668/JPR/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5937 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 15-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI JCIT DHK
• Assessee Lawyers: RAJIV SOGANI CAS
• Keywords: Business expenditure; Corroborative evidences; Onus to prove; TDS

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA -@ ITA NO. 668/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2013-14 SHRI RAM RATAN JOSHI, F-88, ROAD NO. 7, VKI AREA, JAIPUR. C UKE VS. A.C.I.T., CIRCLE-4, JAIPUR. LFKK;H YS[KK LA -@THVKBZVKJ LA -@ PAN/GIR NO.: ABUPJ 0183 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKS J LS @ ASSESSEE BY: SHRI ROHAN SOGANI & SHRI RAJIV SOGANI (CAS) JKTLO DH VKSJ LS @ REVENUE BY : SHRI J.C. KULHARI (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17/09/2019 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 19/09/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 13/03/2018 OF LD. CIT(A)-2, JAIPUR FOR THE A.Y. 2013-14. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN RESTRICTING THE LUMP SUM DISALLOWANCE, MADE BY THE LD. AO, TO 10% OF THE EXPENSES INCURRED ON CONVEYANCE, STAFF & LABOUR WELFARE, TRAVELLING AND TELEPHONE. THE ACTION OF LD. CIT (A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY ITA 668/JP/2018 SHRI RAM RATAN JOSHI VS ACIT 2 PLEASE BE GRANTED BY DELETING THE ENTIRE SUCH DISALLOWANCE MADE BY THE LD. AO AND SUSTAINED BY THE LD. CIT(A). 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN, CONFIRMING THE ACTION OF LD. AO, BY SUSTAINING ADDITION OF RS. 77,410, BY WRONGLY CONSIDERING THE SAME TO BE UNACCOUNTED CASH BALANCE OF THE ASSESSEE. THE ACTION OF LD. CIT (A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY DELETING THE ENTIRE SUCH ADDITION MADE BY THE LD. AO AND SUSTAINED BY THE LD. CIT(A). 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN, CONFIRMING THE ACTION OF LD. AO, BY SUSTAINING DISALLOWANCE OF COMMISSION EXPENSES OF RS. 13,00,000, INCURRED BY THE ASSESSEE. THE ACTION OF LD. CIT (A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY DELETING THE ENTIRE SUCH DISALLOWANCE MADE BY THE LD. AO AND SUSTAINED BY THE LD. CIT(A). 4. THE ASSESSEE CRAVES HIS RIGHTS TO ADD, AMEND OR ALTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 2. AT THE TIME OF HEARING, THE AR OF THE ASSESSEE HAS STATED AT BAR THAT DUE TO SMALLNESS OF THE AMOUNT INVOLVED IN GROUNDS NO. 1 AND 2, THE ASSESSEE DOES NOT PRESS GROUND NOS. 1 AND 2 OF THE ASSESSEES APPEAL AND THE SAME MAY BE DISMISSED AS NOT PRESSED. THE LD DR HAS RAISED NO OBJECTION IF GROUNDS NO. 1 AND 2 OF THE APPEAL IS DISMISSED AS NOT PRESSED. ACCORDINGLY, GROUNDS NO. 1 AND 2 OF THE ASSESSEES APPEAL ARE DISMISSED BEING NOT PRESSED. 3. GROUND NO. 3 OF THE APPEAL IS REGARDING DISALLOWANCE OF COMMISSION EXPENSES OF RS. 13.00 LACS. THE ASSESSEE IS AN INDIVIDUAL AND ITA 668/JP/2018 SHRI RAM RATAN JOSHI VS ACIT 3 ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF SPRINKLER SYSTEM AND ACCESSORIES IN THE NAME AND STYLE OF M/S RAMA PLASTICS. THE ASSESSEE FILED HIS RETURN OF INCOME ON 04/09/2013 DECLARING INCOME OF RS. 21,76,847/-. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE A.O. NOTED THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS. 15.00 LACS UNDER THE HEAD COMMISSION EXPENSES. THE A.O. ASKED THE ASSESSEE TO GIVE DETAILS OF SALES COMMISSION ON WHICH COMMISSION HAS BEEN PAID. THE ASSESSEE EXPLAINED THAT HE HAS PAID COMMISSION TO SIX PARTIES TOTAL AMOUNTING TO RS. 15.00 LACS. ON FURTHER VERIFICATION AND ENQUIRY CONDUCTED BY THE A.O., IT WAS FOUND THAT ONLY ONE OF THE PARTIES NAMELY SHRI DEEPAK KUMAR TRIPATHI WAS APPOINTED AS AUTHORIZED REPRESENTATIVE TO REPRESENT THE ASSESSEE BEFORE THE AGRICULTURE DEPARTMENT, UTTAR PRADESH FOR SUPPLY OF IRRIGATION SYSTEMS. THE A.O. ALSO EXAMINED SHRI DEEPAK KUMAR TRIPATHI AND SHRI VIKASH PANDEY. SINCE THE OTHER PARTIES WERE NOT APPEARED OR PRODUCED BEFORE THE A.O., THEREFORE, THE A.O. FOUND THAT THE OTHER PARTIES ARE NOT DOING ANY INDEPENDENT WORK BUT ARE WORKING WITH SHRI DEEPAK KUMAR TRIPATHI. HENCE, THE A.O. HAS ALLOWED CLAIM OF COMMISSION PAID TO SHRI DEEPAK KUMAR TRIPATHI OF RS. 2.00 LACS AND THE BALANCE OF AMOUNT OF RS. 13.00 LACS PAID TO FIVE OTHER PARTIES WERE DISALLOWED. THE ASSESSEE ITA 668/JP/2018 SHRI RAM RATAN JOSHI VS ACIT 4 CHALLENGED THE ACTION OF THE A.O. BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. 4. BEFORE THE TRIBUNAL, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT ALL THESE SIX PERSONS TO WHOM THE ASSESSEE HAS PAID COMMISSION ARE COMMISSION AGENTS OF THE ASSESSEE AND WERE ASSESSED TO INCOME TAX. THE COMMISSION WAS PAID THROUGH BANKING CHANNELS AFTER DEDUCTING TDS U/S 194H OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) @ 10%. HE HAS FURTHER CONTENDED THAT DUE TO THE NATURE OF THE BUSINESS ACTIVITY OF THE ASSESSEE, THE ASSESSEE NEEDS THE SERVICES OF THESE PERSONS TO SELL THE PRODUCTS IN THE STATE OF UTTAR PRADESH. THE ASSESSEE IS AT THE PANEL OF THE DEPARTMENT OF AGRICULTURE OF UTTAR PRADESH FOR SUPPLYING OF IRRIGATION SYSTEM AS AN APPROVED VENDOR. FOR THE PURPOSE OF ALL THESE ACTIVITIES FOR GETTING ITSELF REGISTERED AND APPROVED VENDOR AS WELL AS REPRESENTING THE ASSESSEE BEFORE THE GOVERNMENT DEPARTMENT, THE ASSESSEE POINTED SHRI DEEPAK KUMAR TRIPATHI AS HIS AUTHORIZED REPRESENTATIVE. THE OTHER FIVE PERSONS TO WHOM THE ASSESSEE HAS PAID COMMISSION HAVE RENDERED THEIR SERVICES IN RESPECT OF SALES OF THE GOODS SUPPLIED BY THE ASSESSEE. THUS, WITHOUT SERVICES OF THESE PERSONS, THE ASSESSEE COULD NOT BE ABLE TO SELL ITS PRODUCT IN THE STATE OF UTTAR PRADESH AND THAT TOO AT DIFFERENT LOCATIONS AND IN THE REMOTE AREAS OF THE UTTAR PRADESH. ONCE THE ASSESSEE HAS ITA 668/JP/2018 SHRI RAM RATAN JOSHI VS ACIT 5 ESTABLISHED THE FACT OF PAYMENT THROUGH BANKING CHANNELS AFTER DEDUCTION OF TAX AND OTHER PARTIES HAVE CONFIRMED THE RECEIPT OF COMMISSION AGAINST THE SERVICES THAT THE ASSESSEE HAS DISCHARGED ITS ONUS TO PROVE THE CLAIM. THE A.O. HAS DOUBTED THE ROLE OF THE OTHER PERSONS WITHOUT BRINGING ANYTHING MATERIAL ON RECORD, THEREFORE, THE PAYMENT OF COMMISSION IS NOT IN DISPUTE THEN THE SAME CANNOT BE DISALLOWED WITHOUT BRINGING ANYTHING CONTRARY ON RECORD. THE LD AR HAS FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT PAID ANY COMMISSION FOR THE SALE UNDERTAKEN IN THE STATE OF RAJASTHAN AND FURTHER NO CLAIM HAS BEEN MADE FOR ANY TRAVELLING EXPENSES IN RESPECT OF SALE MADE IN THE STATE OF UTTAR PRADESH, THUS IT ESTABLISHED THAT THE ASSESSEE HAS AVAILED THE SERVICES OF SIX PERSONS REGARDING SALES MADE IN THE UTTAR PRADESH AND THE COMMISSION PAID IS AN ALLOWABLE BUSINESS EXPENDITURE. HE HAS REFERRED TO THE STATEMENTS RECORDED BY THE A.O. OF SHRI VIKASH PANDEY AS WELL AS SHRI DEEPAK KUMAR TRIPATHI AND SUBMITTED THAT THESE PERSONS WERE ADMITTED TO HAVE RECEIVED COMMISSION AND RENDERING THE SERVICES. THE COMMISSION WAS PAID @ 5% OF THE TOTAL SALE WHICH IS NOT EXCESSIVE. THE LD AR HAS THUS PLEADED THAT THE DISALLOWANCE MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) MAY BE DELETED. ITA 668/JP/2018 SHRI RAM RATAN JOSHI VS ACIT 6 5. ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE FOR AVAILING THE SERVICES OF THESE FIVE PERSONS EXCEPT SHRI DEEPAK KUMAR TRIPATHI WHICH WAS ALLOWED BY THE A.O. THE A.O. HAS CONDUCTED AN ENQUIRY FROM THE OFFICE OF ADDITIONAL DIRECTOR, AGRICULTURE DEPARTMENT, KRISHI BHAWAN, LUCKNOW (U.P.) AND IT WAS FOUND THAT THE ASSESSEE HAS APPOINTED SHRI DEEPAK KUMAR TRIPATHI AS AUTHORIZED REPRESENTATIVE. THERE IS NO OTHER EVIDENCE EITHER CLAIMED OR PRODUCED BY THE ASSESSEE IN RESPECT OF OTHER FIVE PERSONS. THUS, THE CLAIM OF THE ASSESSEE IS DEVOID OF MERITS THAT THE ASSESSEE HAS FAILED TO PRODUCED ANY DOCUMENTARY EVIDENCE REGARDING PAYMENT OF THE OTHER PERSONS AS COMMISSION AGENT OR RENDERING OF SERVICES IN RESPECT OF SALES OF THE ASSESSEE. THE MERE PAYMENT OF THE AMOUNT THROUGH BANKING CHANNEL WILL NOT IPSO FACTO PROVED THE FACT THAT THE EXPENDITURE IS INCURRED WHOLLY OR EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE. THE LD DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS PAID COMMISSION OF RS. 15.00 LACS TO SIX PERSONS AS UNDER: 1. SHRI DEEPAK KUMAR TRIPATHI RS. 2,00,000/- 2. MS. PREETI TRIPATHI RS. 2,00,000/- 3. MR. VIKAS PANDEY RS. 2,00,000/- ITA 668/JP/2018 SHRI RAM RATAN JOSHI VS ACIT 7 4. MS. PUSHPA PANDEY RS. 2,00,000/- 5. MR. MOHD. DANISH HUSSAIN RS. 4,00,000/- 6. M/S DEEPAK KUMAR TRIPATHI (HUF) RS. 3,00,000/- TOTAL RS. 15,00,000/- IT IS APPARENT FROM THESE NAMES ITSELF THAT THE ASSESSEE PAID COMMISSION TO SHRI DEEPAK KUMAR TRIPATHI, MS. PREETI TRIPATHI AND DEEPAK KUMAR TRIPATHI (HUF) ALL THREE PARTIES ARE FAMILY MEMBERS. EVEN THE ASSESSEE HAS NOT DISPUTED THAT SHRI DEEPAK KUMAR TRIPATHI IS THE KARTA OF DEEPAK KUMAR TRIPATHI (HUF), THEREFORE, EXCEPT THE ADMISSION OF SHRI DEEPAK KUMAR TRIPATHI AS AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, THERE IS NOTHING ON RECORD TO SUGGEST THAT MS. PREETI TRIPATHI AND DEEPAK KUMAR TRIPATHI (HUF) WERE ALSO APPOINTED AS SALES AGENT. THERE IS NEITHER ANY AGREEMENT NOR ANY CORRESPONDENCE. EVEN THERE IS NO BILL RAISED BY THESE PERSONS IN RESPECT OF ANY SERVICE RENDERED TO THE ASSESSEE. SIMILARLY IN THE CASE OF SHRI VIKAS PANDEY, PAYMENT WAS MADE TO SHRI VIKAS PANDEY AND MS. PUSHPA PANDEY BOTH ARE FAMILY MEMBERS AND IT APPEARS THAT THESE ARE HUSBAND AND WIFE AS IN CASE OF SHRI DEEPAK KUMAR TRIPATHI AND MS. PREETI TRIPATHI. THE A.O. HAS ALSO RECORDED STATEMENT OF SHRI VIKASH PANDEY AND HE HAS CONFIRMED THE ACTIVITY OF SELLING THE PRODUCTS OF THE ASSESSEE THROUGH AGRICULTURE DEPARTMENT OF THE UTTAR PRADESH. HE HAS ALSO CONFIRMED THAT IN THE PROCESS OF SELLING THEY HAD TO COMPLETE DOCUMENTATION AND INTERACTING WITH THE DEPARTMENT IN RESPECT OF SUBSIDY ITA 668/JP/2018 SHRI RAM RATAN JOSHI VS ACIT 8 PROVIDED BY THE GOVT. TO THE FARMERS ON THESE PRODUCTS. THUS, IT APPEARS THAT THE COMMISSION PAID TO SHRI DEEPAK KUMAR TRIPATHI, VIKASH PANDEY AND MD. DANISH HUSSAIN WERE IN RESPECT OF SALES OF THE ASSESSEES PRODUCT IN THE STATE OF UTTAR PRADESH. THOUGH, THERE WAS NO AGREEMENT OR ANY OTHER SUPPORTING EVIDENCE EXCEPT THEIR STATEMENT/CONFIRMATIONS. ONCE THE A.O. HAS EXAMINED THESE PARTIES AND CONFIRMED HAVING RENDERED SERVICES THEN THE CLAIM IN RESPECT OF THESE THREE PARTIES CANNOT BE DENIED. AS THE BUSINESS OF THE ASSESSEE FOR SELLING OF ITS PRODUCTS IN THE STATE OF UTTAR PRADESH IS NOT IN DISPUTE AND IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS NOT CLAIMED ANY OTHER EXPENDITURE REGARDING TRAVELLING IN RESPECT OF SALE IN THE STATE OF UTTAR PRADESH, THEREFORE, COMMISSION PAID TO THREE PARTIES NAMELY SHRI DEEPAK KUMAR TRIPATHI, SHRI VIKASH PANDEY AND MOHD. DANISH HUSSAIN ARE ALLOWABLE DEDUCTION BEING INCURRED FOR THE PURPOSE OF BUSINESS. AS REGARDS THE COMMISSION PAID TO MS. PREETI TRIPATHI, MS. PUSHPA TRIPATHI AND DEEPAK KUMAR TRIPATHI (HUF), IT IS APPARENT THAT THESE ARE ONLY THE NAME FACILITATED BY SHRI DEEPAK KUMAR TRIPATHI AND SHRI VIKASH PANDEY FOR INFLATING THE EXPENDITURE BY THE ASSESSEE. THEREFORE, IN ABSENCE OF ANY MATERIAL TO SHOW THAT THESE OTHER PERSONS EVEN ARE COMPETENT TO RENDER THE SERVICE, THE CLAIM OF COMMISSION PAID TO THE RELATED PARTIES SHRI DEEPAK KUMAR TRIPATHI AND ITA 668/JP/2018 SHRI RAM RATAN JOSHI VS ACIT 9 VIKASH PANDEY IS NOT FOUND TO BE GENUINE. HENCE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CLAIM OF THE ASSESSEE IS ALLOWED IN RESPECT OF SHRI VIKASH PANDEY AND MOHD. DANISH HUSSAIN AND THE BALANCE AMOUNT OF DISALLOWANCE IS SUSTAINED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH SEPTEMBER, 2019 SD/- FOT; IKY JKO (VIJAY PAL RAO) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 19 TH SEPTEMBER, 2019 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI RAM RATAN JOSHI, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE A.C.I.T., CIRCLE-4, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 668/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR