I.T.O. 8(3)(1), MUMBAI V. SAVITRI EXPORTS LTD, MUMBAI

ITA 6772/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7942 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 23-01-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 07-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K SHIVARAM
• Keywords: Additional evidence; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI N.K.BILLAIYA, AM, AND SHRI SANJAY GARG, JM ./ I.T.A. NO. 6772/MUM/2011 ( / ASSESSMENT YEAR: 2003-04) I NCOME - TAX OFFICER - 8(3) - 1, ROOM NO.201, 2 ND FLOOR, AAYAKAR BHAVAN, MUMBAI-400020 / VS. M/S SAVITRI EXPORTS LTD. C/O- PACKING PAPER PRODUCTS COMPOUND, MIDC AREA, B-CROSS ROAD, ANDHERI(E), MUMBAI-400093 ./ PAN : AAACS7588Q ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY: SHRI PANKAJ KUMAR / RESPONDENT BY : SHRI K.SHIVARAM / DATE OF HEARING : 06/08/2014 / DATE OF PRONOUNCEMENT : 13/08/2014 !' / O R D E R PER N.K.BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS PREFERRED AGAIN ST THE ORDER OF THE CIT(A)-18, MUMBAI DATED 15/07/2011 PERTAINING TO AS SESSMENT YEAR 2003-04. 2. THE SOLE GRIEVANCES OF THE REVENUE IS THAT THE C IT(A) ERRED IN ACCEPTING ADDITIONAL EVIDENCES IN CONTRAVENTION OF RULE 46A OF THE I.T. RULES AND FURTHER ERRED IN RESTRICTING THE DISALLOW ANCE U/S 40A(2)(B) OF THE ACT TO 10% OF RS.25,35,190/-. 3. THE ASSESSEE IS IN THE BUSINESS OF PAPER TRADING . FOR THE YEAR UNDER CONSIDERATION THE RETURN OF INCOME WAS FILED ON 27/ 11/2003 DECLARING TOTAL INCOME AT RS.2,65,125/-. THE RETURN WAS SELE CTED FOR SCRUTINY ITA NO.6772/MUM/2011 M/S SAVITRI EXPORTS LTD. 2 ASSESSMENT AND STATUTORY NOTICES WERE ISSUED AND SE RVED UPON THE ASSESSEE. WHILE SCRUTINIZING THE RETURN OF INCOME, THE AO NOTICED THAT THE ASSESSEE HAS PURCHASED PAPER OF RS.67,38,477/- FROM M/S MADHYADESH PAPER LTD. (MPL) AND SOLD THE SAME TO ELLORA PAPER MILLS LTD. FOR RS.99,12,304/-. THE AO FURTHER NOTICED THAT THE AS SESSEE HAS PAID COMMISSION OF RS.25,37,190/- TO M/S C.P. ENTERPRISE S, WHICH IS RELATED PERSON AS PER THE PROVISIONS OF SECTION 40A(2)(B) O F THE ACT. THE AO ASKED THE ASSESSEE TO JUSTIFY THE PAYMENT OF COMMISSION T O C.P. ENTERPRISES. ON RECEIVING NO PLAUSIBLE REPLY, THE AO FURTHER NOTICE D THAT THE COMMISSION PAID IS AT THE RATE OF 6,000 PER METRIC TON. FURTH ER, THE ASSESSEE HAS NOT PAID COMMISSION TO ANYONE ELSE NOR THE RECIPIENT OF THE COMMISSION, C.P. ENTERPRISES, HAS RECEIVED ANY COMMISSION FROM ANY O THER PARTY. THE AO PROCEEDED BY RELYING ON CERTAIN JUDICIAL DECISIONS CONSIDERED BY HIM IN THE ASSESSMENT ORDER AND CONCLUDED THAT C.P. ENTERPRISE S HAS NOT PROVIDED ANY TYPE OF SERVICES. THE COMMISSION PAYMENT IS NO THING BUT THE BOGUS ARRANGEMENT PREPARED BY THE ASSESSEE WITH THE RELAT ED PARTY C.P. ENTERPRISES. THE AO WENT ON TO TREAT THE TRANSACTI ON AS BOGUS AND DISALLOWED THE COMMISSION OF RS.25,37,190/- . 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ). IT WAS CONTENDED THAT THE AO HAS OBJECTED TO THE QUANTUM OF COMMISSI ON PAID THOUGH NO COMPARABLE CASE WAS BROUGHT ON RECORD. IT WAS FURT HER EXPLAINED THAT THE SELLER MADHYADESH PAPER LIMITED IS NOT A RELATED PA RTY. FURTHER, THE TAX WAS DEDUCTED AT SOURCE, M/S C.P. ENTERPRISES HAS CO NFIRMED TO HAVE RECEIVED THE COMMISSION. THE ASSESSEE FURTHER SUBM ITTED THAT THE PAYMENT IS EVIDENCED BY DOCUMENTARY EVIDENCE SUCH A S COMMISSION AGREEMENT WITH C.P. ENTERPRISES, DEBIT NOTES RAISED AGAINST SERVICES RENDERED AND SALES ORDER AND PAYMENTS RECEIVED. AF TER CONSIDERING THE FACTS AND THE SUBMISSIONS AND THE DOCUMENTARY EVIDE NCES BROUGHT BEFORE HIM, THE CIT(A) REMANDED THE MATTER TO THE AO. THE AO IN HIS REMAND REPORT DATED 02/11/2010 OBJECTED TO THE ADMISSION O F ADDITIONAL EVIDENCE ITA NO.6772/MUM/2011 M/S SAVITRI EXPORTS LTD. 3 UNDER RULE 46A OF THE I.T. RULES 1962. FURTHER, ON MERITS, THE AO IN HIS REMAND REPORT STATED THAT THE PAYMENT OF COMMISSIO N WAS ON HIGHER SIDE AND THE MOU WITH C.P. ENTERPRISES IS POST THE TRANS ACTION WITH MPL. AFTER CONSIDERING THE REMAND REPORT AND THE SUBMISSIONS O F THE ASSESSEE THE CIT(A) HELD AS UNDER. 4. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT, THE REMAND REPORT OF A.O. AND IN THIS CASE, IT IS CLEAR THAT THE APPELLANT HAD TO MAKE THIS ARRANGEMENT ON ACCOUNT OF COMMERCIAL EXPEDIENCY - AS BROUGHT OUT CLEARLY FROM THE FACTS OF THE CASE BECAUSE M/S C.P. ENTERPRISES WAS NOT HAVING SALES TAX REGISTRATION A ND IN ORDER TO PROCURE THE ORDER AND CARRY OUT THE ATTENDANT OBLIGATIONS THE ASSESSEE HAD TO HAVE THIS ARRANGEMENT WITH M/S C.P. ENTERPRISES WHICH WAS ASSIGNING THIS ORDER TO THE APPELLANT AND WHICH IT HAD TO BE COMPENSATED FOR - IN THE FORM OF COMMISSION. 5. THIS FACT IS CLEARLY EVIDENCED BY THE LETTER B ROUGHT ON RECORD BY THE APPELLANT DURING THE COURSE OF REMAND PROCEEDINGS THE A.O. IN THE FORM OF LETTER DATED 02/06/2009 FROM M/S MPL TO THE A.O. STATING THAT M/S C.P. ENTE RPRISES HAVE NEGOTIATED WITH M/S. MPL FOR SUPPLY OF THE MATERIAL IN QUESTION AND SUBSEQ UENTLY THE SAME WAS ASSIGNED TO THE APPELLANT BECAUSE M/S C.P. ENTERPRISES WAS NOT HAVI NG ANY SALES TAX REGISTRATION NUMBER AND THAT M/S MPL HAVE NOT PAID ANY COMMISSION TO M/ S C.P. ENTERPRISES. 5.1. THIS FACT TOGETHER WITH THE SUBMISSIONS ON REC ORD BY THE APPELLANT SHOWS THAT THE TRANSACTION WAS GENUINE AND APPELLANT WAS REQUIRED TO PAY COMMISSION TO M/S C.P. ENTERPRISES WHICH IT DID. 5. THE CIT(A) FINALLY CONCLUDED BY RESTRICTING THE DISALLOWANCE TO 10% OF RS.25,35,190/-. ON ADMISSION OF ADDITIONAL EVID ENCES, THE CIT(A) RELIED UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF PRABHABATI SHAH 231 ITR 1(BOM) AND SURE TECH HOSPIT AL AND RESEARCH CENTER 293 ITR 53(BOM). 6. AGGRIEVED BY THIS THE REVENUE IS BEFORE US. 7. THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF TH E AO. PER CONTRA THE COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN S UBMITTED BEFORE THE LOWER AUTHORITIES. WE HAVE CAREFULLY PERUSED THE O RDERS OF THE AUTHORITIES BELOW AND THE RELEVANT MATERIAL EVIDENCES BROUGHT O N RECORD BEFORE US. SO FAR AS, THE ADMISSION OF ADDITIONAL EVIDENCES ARE C ONCERNED, WE FIND THAT THE CIT(A) HAS RELIED UPON THE DECISIONS OF THE JUR ISDICTIONAL HIGH COURT THEREFORE NO INTERFERENCE IS CALLED FOR. ON MERIT OF THE CASE, WE FIND THAT ITA NO.6772/MUM/2011 M/S SAVITRI EXPORTS LTD. 4 C.P. ENTERPRISES HAD NEGOTIATED WITH M/S MPL FOR SU PPLY OF THE MATERIAL IN QUESTION. SINCE C.P. ENTERPRISES WAS NOT HAVING AN Y SALES TAX REGISTRATION NUMBER THE SAID ORDER WAS ASSIGNED TO THE ASSESSEE. THE ASSESSEE HAS PAID COMMISSION ON THIS ASSIGNMENT OF THE ORDER. IT IS NOT IN DISPUTE THAT PAPERS WERE PURCHASED FROM M/S MADHYAD ESH PAPER LTD. AND THE SAME WERE SOLD TO ELLORA PAPERS LTD. MADHYADES H PAPER LTD. HAS CONFIRMED THE TRANSACTION VIDE LETTER DATED 08/05/2 002 WHICH IS AT PAGE 112 OF THE PAPER BOOK. THE MOU WITH C.P. ENTERPRISE S CLEARLY SHOW THAT C.P. ENTERPRISES HAVE ORDER FOR SUPPLY OF 400 TONES OF NEWSPRINTS OF VARIOUS GRADES. SINCE, C.P. ENTERPRISES WAS NOT HA VING ANY REGISTRATION NUMBER, THIS ORDER WAS ASSIGNED TO THE ASSESSEE. T HE ASSESSEE AGREED TO PURCHASE NEWSPRINTS FROM MADHYADESH PAPERS LTD. AND SUPPLY THE SAME TO ELLORA PAPERS LTD. FOR WHICH THE ASSESSEE HAS MA DE PAYMENT OF COMMISSION TO C.P. ENTERPRISES AFTER MAKING TDS AS PER THE PROVISIONS OF THE LAW. CONSIDERING ALL THESE EVIDENCES, WE DO NO T FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE CIT(A), APPEAL F ILED BY THE REVENUE IS ACCORDINGLY DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 13/08/2014 !' # $ % &! 13/08/2014 , ' ( SD/- (SANJAY GARG) SD/- (N.K.BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER $ ) MUMBAI; &! /DATED : 13 TH AUGUST, 2014. F{X~{TA F{X~{TA F{X~{TA F{X~{TA P.S. P.S. P.S. P.S. ' # $%&' ('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. ITA NO.6772/MUM/2011 M/S SAVITRI EXPORTS LTD. 5 3. * ( ) / THE CIT- , MUMBAI. 4. * / CIT(A)- , MUMBAI 5. +,' --./ , ./ , $ ) / DR, ITAT, MUMBAI 6. '01 2 / GUARD FILE. ' ) / BY ORDER, + - //TRUE COPY// * / )+ , (DY./ASSTT. REGISTRAR) , $ ) / ITAT, MUMBAI