M/S. JYOTI BRIGHT BAR PVT.LTD., MUMBAI V. ASST. C.I.T. CR-7, MUMBAI

ITA 6705/MUM/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4673 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 13-09-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 20-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Keywords: Principle of natural justice; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 6705/MUM/2008 (ASSESSMENT YEAR: 2005-06) M/S. JYOTI BRIGHT BAR PVT. LTD. DCIT, CENTRAL RANGE 7 1401, RAHEJA CENTRE MUMBAI NARIMAN POINT, MUMBAI 400021 VS. PAN - AAACJ 8391 G APPELLANT RESPONDENT APPELLANT BY: SHRI VIJAY MEHTA RESPONDENT BY: SHRI SURENDRA KUMAR O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A), CENTRAL V, MUMBAI DATED 18.09.2008. ASSESSEE IS CONTESTING THE DISALLOWANCE OF COMMISSION OF ` 12,20,867/-. 2. BRIEFLY STATED, ASSESSEE IS ENGAGED IN COMMISSION AND BROKERAGE AND TRADING IN DEPB LICENCE DURING THE YEAR. ASSESSEE C OMPANY RECEIVED BROKERAGE COMMISSION AMOUNTING TO ` 66,76,733/- AND HAS PAID A COMMISSION AMOUNTING TO ` 12,20,867/-. THIS COMMISSION STATED TO HAVE BEEN PAID TO M/S. PANKAJ WOVEN SACKS PVT. LTD. THE A.O. ASKED FOR THE SERVICES RENDERED BY THE SAID COMPANY FOR PAYMENT O F COMMISSION. IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE SAID PARTY WAS ENGAGED FOR ARRANGING EXPORT TURNOVER TO THE EXPORT HOUSE M/S. HINDUJA EXPORTS AND THE EXPORTS OF M/S. PEC LTD. (A GOVERNMENT OF INDIA UND ERTAKING) WAS SOLD IN FAVOUR OF M/S. HINDUJA EXPORTS THROUGH M/S. PANKAJ WOVEN SACKS PVT. LTD. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS RECE IVED COMMISSION OF ` 24,41,733/- ON THE TRANSACTION AND 50% OF THE COMMI SSION OF ` 12,20,867/- WAS PAID TO M/S. PANKAJ WOVEN SACKS PVT . LTD. FOR COORDINATING AND ARRANGING THE ENTIRE EXPORT TURNOV ER OF M/S. PEC LTD., NEW DELHI IN FAVOUR OF M/S. HINDUJA EXPORTS. THERE AFTE R THE A.O. ENQUIRED FROM M/S. PEC LTD. AND M/S. PEC LTD., VIDE THEIR LETTER DATED 14.12.2007 ISSUED ITA NO. 6705/MUM/2008 M/S. JYOTI BRIGHT BAR PVT. LTD. 2 FROM THE MUMBAI OFFICE, INFORMED THAT THEY ARE NOT AWARE ABOUT THE ASSESSEE COMPANY. THE ASSESSEE WAS ASKED VIDE ORDER SHEET DATED 27.12.2007 AS TO WHY BROKERAGE SHOULD NOT BE DISALL OWED. ASSESSEE FILED REPLY DATED 28.12.2007. A.O. RELYING ON ANOTHER LET TER RECEIVED FROM M/S. PEC LTD. DATED 28.12.2007, WHICH WAS DISCUSSED IN T HE LATER PART OF THE ASSESSMENT ORDER, DISALLOWED THE COMMISSION PAID. B EFORE THE CIT(A) THE ASSESSEE TOOK OBJECTION FOR RELYING ON THE LETTER D ATED 28.12.2007 WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE TO CONTEST AND F ILED CONFIRMATION FROM M/S. PEC LTD. DATED 19.04.2008 FROM THEIR DELHI OFF ICE WITH THE SUBMISSION THAT THE TRANSACTION OF SALE OF EXPORT WAS DONE BY THEIR DELHI OFFICE AND WAS NOT KNOWN TO THE MUMBAI OFFICE. M/S. PEC LTD. CONFI RMED THE RECEIPT OF INCENTIVE OF ` 1,84,44,775/- FROM M/S. HINDUJA EXPORTS AND USING T HE SERVICES OF M/S. PANKAJ WOVEN SACKS PVT. LTD. IN TH E TRANSACTION FOR THE PERIOD APRIL 2003 TO MARCH 2004 FOR A TURNOVER OF ` 122.08 CRORES. ASSESSEE ALSO FILED CONFIRMATION FROM M/S. HINDUJA EXPORTS C ONFIRMING THE PERIOD FROM 01.04.2004 TO 31.03.2005 FOR ARRANGING THE SAL E OF EXPORT TURNOVER OF ` 122.08 CRORES FROM M/S. PEC LTD. THROUGH M/S. PANKA J WOVEN SACKS PVT. LTD. AND PAYMENT OF COMMISSION TO THE ASSESSEE. LIK EWISE THE ASSESSEE ALSO FILED CONFIRMATION OF RECEIPT OF COMMISSION FROM AD ANI ENTERPRISES LTD. IT WAS THE CONTENTION OF THE ASSESSEE THAT IT HAS RECE IVED TWO COMMISSIONS FROM TWO COMPANIES TOTALLING TO ` 66.76 LAKHS AND PAID ONLY ONE COMMISSION, I.E. 50% OF THE COMMISSION RECEIVED FROM M/S. HINDU JA EXPORTS TO M/S. PANKAJ WOVEN SACKS PVT. LTD. AND THIS COMMISSION WA S PAID IN THE COURSE OF BUSINESS. THE CIT(A), HOWEVER, DID NOT AGREE WITH A SSESSEES CONTENTIONS RELYING ON THE LETTER DATED 28.12.2007 RECEIVED FRO M THE SAID M/S. PEC LTD. AND ALSO ON THE VIEW THAT SINCE M/S. PEC LTD. IS A GOVERNMENT OF INDIA UNDERTAKING THE QUESTION OF ANY SERVICE BY A THIRD PARTY FOR INTRODUCTION TO THE UNDERTAKING DOES NOT ARISE. HE ACCORDINGLY HELD THAT THE SERVICES ARE NOT RENDERED EITHER TO THE ASSESSEE OR TO M/S. PEC LTD. AND THE BROKERAGE CANNOT BE ALLOWED. 3. DRAWING OUR ATTENTION TO THE ORDERS OF THE A.O. AND THE CIT(A), IT WAS THE SUBMISSION OF THE LEARNED COUNSEL THAT THE A.O. HAS NOT FOLLOWED THE PRINCIPLE OF NATURAL JUSTICE AS THE CONFIRMATION RE CEIVED FROM THE SAID M/S. PEC LTD. BOMBAY OFFICE HAS NOT BEEN CONFRONTED TO T HE ASSESSEE. HE REFERRED ITA NO. 6705/MUM/2008 M/S. JYOTI BRIGHT BAR PVT. LTD. 3 TO THE SECOND LETTER RECEIVED FROM M/S. PEC LTD. DA TED 28.12.2007 AND THE ORDER OF THE A.O. DATED 28.12.2007 TO SUBMIT THAT T HE SECOND LETTER WHICH WAS RELIED UPON BY THE A.O. WAS NOT FURNISHED TO TH E ASSESSEE EVEN AS OF NOW AND THE LEARNED CIT(A) ALSO RELIED ON THE SAME LETTER. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE, IN THE COURSE OF APPEA L PROCEEDINGS BEFORE THE CIT(A), FILED VITAL EVIDENCES OBTAINED FROM M/S PEC LTD. VIDE CONFIRMATION DATED 19.04.2008 CONFIRMING NOT ONLY SALE OF EXPORT TURNOVER TO M/S. HINDUJA EXPORTS THROUGH M/S. PANKAJ WOVEN SACKS PVT . LTD. AND FURTHER RECEIPT OF INCENTIVES FROM M/S. HINDUJA EXPORTS AND ALSO TO THE FACT THAT THE TRANSACTION OF SALE OF EXPORT WAS DONE BY THE DELHI OFFICE AND THE SAME WAS NOT KNOWN TO THE MUMBAI OFFICE. IT WAS HIS SUBMISSI ON THAT THE LEARNED CIT(A) DID NOT MAKE ANY ENQUIRIES WITH REFERENCE TO THE CONFIRMATION FILED BY THE ASSESSEE AND SIMPLY RELIED UPON THE LETTER RECE IVED FROM M/S. PEC LTD. DATED 28.12.2007, WHICH WAS NOT FURNISHED TO THE AS SESSEE. IT WAS HIS SUBMISSION THAT THE ASSESSEE HAS RECEIVED SERVICES FROM M/S. PANKAJ WOVEN SACKS PVT. LTD. BY INTRODUCING M/S. PEC LTD. TO THE ASSESSEE COMPANY AND SUBSEQUENT SALE TO HINDUJA EXPORTS IN WHICH THE SAI D M/S. PEC LTD. RECEIVED INCENTIVES AND THE ASSESSEE COMPANY THE CO MMISSION AT 2% OF THE TURNOVER. IT WAS SUBMITTED THAT 50% OF THE COMMISSI ON RECEIVED WAS IN TURN PAID TO M/S. PANKAJ WOVEN SACKS PVT. LTD. IT WAS HI S SUBMISSION THAT THE PAYMENT WAS MADE GENUINELY AND HE HAS NO OBJECTION IF THE MATTER WAS REMITTED BACK TO THE A.O. FOR FRESH EXAMINATION AS THE ASSESSEES CONTENTIONS WERE NOT VERIFIED OR ACCEPTED BY THE AU THORITIES. 4. THE LEARNED D.R., HOWEVER, SUBMITTED THAT THE CIT(A ) HAS DISCUSSED ABOUT THE ADDITIONAL EVIDENCE FILED BEFORE THE CIT( A) AND REJECTED THE SAME, HENCE THE ORDER OF THE CIT(A) SHOULD BE CONFIRMED. 5. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE ORDE RS AND SUBMISSIONS OF THE ASSESSEES COUNSEL, IT IS OBVIOU S THAT THE SECOND LETTER RECEIVED FROM M/S. PEC LTD. DATED 28.12.2007 WAS NO T CONFRONTED TO THE ASSESSEE. HENCE, RELIANCE ON THE SAME IN DENYING AS SESSEES CLAIM WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSEE GOES AGAINST THE PRINCIPLES ESTABLISHED BY THE HON'BLE SUPREME COURT IN THE CASE OF KISHINC HAND CHELLARAM 125 ITR 713. IT IS AN ESTABLISHED LAW THAT ANY INFORMAT ION TO BE USED AGAINST THE ASSESSEE MUST BE PROVIDED TO THE ASSESSEE AND AN OP PORTUNITY TO CONFRONT ITA NO. 6705/MUM/2008 M/S. JYOTI BRIGHT BAR PVT. LTD. 4 SHOULD HAVE BEEN GIVEN TO THE ASSESSEE. IT IS ALSO AN ESTABLISHED PRINCIPLE THAT THE OPPORTUNITY TO BE PROVIDED TO THE ASSESSEE MUST BE REASONABLE AND NOT AN IDEAL FORMALITY. AS SEEN FROM THE ORDER OF T HE A.O. THE FIRST LETTER RECEIVED FROM M/S PEC LTD. DATED 14.12.2007 WAS GIV EN TO THE ASSESSEE AND ASKED TO EXPLAIN VIDE ORDER SHEET ENTRY DATED 27.12 .2007, I.E. ONE DAY BEFORE COMPLETION OF THE ASSESSMENT PROCEEDINGS AND THE AS SESSEE IN FACT FILED A REPLY DATED 28.12.2007 STATING THAT IT DO NOT HAVE ANY DIRECT TRANSACTION WITH M/S. PEC LTD. BUT THROUGH M/S. PANKAJ WOVEN SA CKS PVT. LTD. AND FILED THE CONFIRMATION OF M/S. PANKAJ WOVEN SACKS P VT. LTD. IN SUPPORT OF THE CLAIM. THE A.O. RELIED ON THE LETTER DATED 28.1 2.2007 STATED TO HAVE BEEN RECEIVED ON THAT DAY AND PASSED THE ORDER ON THE VE RY SAME DAY WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSEE. HENCE, THERE IS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AS POINTED OUT BY THE ASSESSEE. 6. BEFORE THE CIT(A) THE ASSESSEE HAS EXPLAINED THAT T HE EXPORT TURNOVER OF M/S. PEC LTD. WAS SOLD TO M/S. HINDUJA EXPORTS AND IN THAT PROCESS THE ASSESSEE EARNED COMMISSION OF ` 24,41,733/- FROM M/S. HINDUJA EXPORTS WHICH IN TURN WAS PASSED ON AS SUB-BROKERAGE/COMMIS SION TO M/S. PANKAJ WOVEN SACKS PVT. LTD. OF ` 12,20,867/-. THERE IS CONFIRMATIONS OF RECEIPT OF COMMISSION AS WELL AS PAYMENT OF COMMISSION. WITH R EFERENCE TO THE SERVICES RENDERED THE ASSESSEE ALSO OBTAINED CONFIR MATION FROM M/S. PEC LTD. DATED 19.04.2008 FROM ITS NEW DELHI OFFICE. TH IS LETTER PLACED IN PAPER BOOK PAGE NO. 6 ALSO CONFIRMS THAT THE TRANSACTION OF SALE OF EXPORT WAS DONE BY THE DELHI OFFICE AND THE SAME WAS NOT KNOWN TO THE MUMBAI OFFICE. THE LEARNED CIT(A) DID NOT EXAMINE FURTHER WHEN THE RE IS A CONFIRMATION FROM M/S. PEC LTD., A GOVERNMENT OF INDIA ENTERPRIS E, FROM THEIR DELHI OFFICE. HIS LOGIC THAT IT WAS DIFFICULT TO CONCEIVE THAT A TRANSACTION OF THIS NATURE WOULD BE DENIED SIMPLY ON ACCOUNT OF IGNORAN CE OF A BRANCH OFFICE, PARTICULARLY WHEN THE ORGANIZATION IS A GOVERNMENT BODY IS MISPLACED. AS SEEN FROM THE SEQUENCE OF EVENTS M/S. PEC LTD., A G OVERNMENT BODY, SOLD ITS EXPORT TURNOVER TO AN EXPORT HOUSE THROUGH M/S PAN KAJ WOVEN SACKS PVT. LTD AND ADMITS TO HAVE RECEIVED INCENTIVES OF ` 1,84,44,775/- WHICH MEANS THAT NOT ONLY THE GOVERNMENT BODY HAS UNDERTAKEN A TRANSACTION OF SALE OF EXPORTS TO M/S. HINDUJA EXPORTS BUT ALSO ENGAGED M/ S. PANKAJ WOVEN SACKS PVT. LTD. TO FOLLOW UP WITH EXPORT INVOICES, SHIPPI NG BILLS, BANK CERTIFICATE, ITA NO. 6705/MUM/2008 M/S. JYOTI BRIGHT BAR PVT. LTD. 5 ETC. IT IS ALSO FURTHER CONFIRMED THAT IT HAS NOT PAID ANY COMMISSION OR BROKERAGE TO M/S. PANKAJ WOVEN SACKS PVT. LTD. SINC E IT IS ASSESSEE WHO RECEIVED THE COMMISSION FROM HINDUJA EXPORTS, OBVI OUSLY A PART OF THE COMMISSION RECEIVED WAS PAID TO THE SAID M/S. PANKA J WOVEN SACKS PVT. LTD. A.O. ACCEPTS COMMISSION RECEIPTS AND ALSO GIVE S A FINDING THAT ASSESSEE IS ENGAGED IN COMMISSION BUSINESS DURING THE YEAR. SINCE THE ISSUE WAS NOT CONSIDERED BY THE CIT(A) AND THE CONFIRMATION ISSUE D BY M/S. PEC LTD. WAS NOT EXAMINED TO ITS LOGICAL END, WE ARE OF THE OPIN ION THAT THE ISSUE OF COMMISSION REQUIRES EXAMINATION AFRESH BY THE A.O. FOR THIS REASON THE MATTER IS RESTORED TO THE FILE OF THE A.O., WHO IS DIRECTED TO MAKE FRESH ENQUIRIES WITH M/S. PEC LTD. WITH REFERENCE TO CONF IRMATION FILED DATED 19.04.2008 AND ALSO OBTAIN CLARIFICATION WITH REFER ENCE TO THE EARLIER TWO LETTERS FILED BY M/S PEC LTD INCLUDING THE REFLECTI ON OF YEAR OF TRANSACTION AS 2003-04( SHOULD HAVE BEEN 2004-05) AND EXAMINE THE ISSUE AFRESH. THE ASSESSEE SHOULD BE GIVEN ADEQUATE AND REASONABLE OP PORTUNITY IN SUPPORT OF ITS CLAIM. GROUND IS CONSIDERED ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH SEPTEMBER 2010. SD/- SD/- (D.K. AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 24 TH SEPTEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CENTRAL V, MUMBAI 4. THE CIT CENTRAL II, MUMBAI CITY 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.