Sh. Ramesh Kumar Pabbi, New Delhi V. ACIT, New Delhi

ITA 6890/DEL/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4798 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 22-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Assessee Lawyers: GAUTAM JAIN SH LALIT MOHAN
• Keywords: Rule of consistency; Deemed dividend
• Section: 131; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER AND SH. L. P. SAHU, ACCOUNTANT MEMBER ITA NO.6890/DEL/2014 ASSESSMENT YEAR: 2011-12 RAMESH KUMAR PABBI PROP. OF M/S. S. L. ENTERPRISES A-41, PHASE-II, MAYAPURI INDUSTRIAL AREA, NEW DELHI PAN AANPP5995Q VS ACIT CIRCLE -38 (1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. GAUTAM JAIN, ADVOCATE SH. LALIT MOHAN, CA RESPONDENT BY SH. S. R. SENAPATI, SR DR DATE OF HEARING: 20 /0 7 /2018 DATE OF PRONOUNCEMENT: 01 / 0 8 /2018 ORDER PER BHAVNESH SAINI, JM: THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAIN ST THE ORDER OF LD. CIT(APPEALS)-XXVIII, NEW DELHI DATED 09.10.2014 FOR A. Y. 2011-12. ITA NO.6890 /DEL/2014 2 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 3. ON GROUND NO.1, THE ASSESSEE CHALLENGED ADDITION OF RS.8,23,964/-ON ACCOUNT OF DEEMED DIVIDEND U/S 2 (22) (E) OF THE IT ACT. 4. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO PROVIDE THE DETAILS OF UNSECURED LOAN FOR THE CURRE NT YEAR. ONLY ONE UNSECURED LOAN FROM M/S. RAMSAN COMMUNICATION LIMIT ED WAS SHOWN IN WHICH THE ASSESSEE HAS SUBSTANTIAL INTEREST. THE LO AN OUTSTANDING AS ON 31.03.2011 WAS RS.1,12,95,724/- AND ACCUMULATED PRO FIT ON THE SAME DATE WAS RS.8,23,964/-. THE ASSESSEE SUBMITTED THAT HE HAS ENTERED INTO AN AGREEMENT TO SELL WITH M/S RAMSAN COMMUNICATION LIM ITED WHO FINDS IT DIFFICULT TO OPERATE FROM SHIMLA AND INTENDS TO PUR CHASE AN INDUSTRIAL LAND IN DELHI TO SHIFT ITS OPERATION FROM THERE TO HERE, M/S. S.L. ENTERPRISES (PROPRIETARY SHIP CONCERN OF ASSESSEE) MADE AN AGRE EMENT WITH THE SAID COMPANY FOR SALE OF INDUSTRIAL PLOT AT MANGOLPURI, NEW DELHI. THUS, THE COMPANY ADVANCED OF RS.1.12 CRORES TO THE ASSESSEE FOR THE PURCHASE OF INDUSTRIAL PLOT. THE ASSESSING OFFICER, HOWEVER, NO TED THAT THE BALANCE SHEET OF THE ASSESSEE SHOWS THERE WAS UNSECURED LOAN FROM THE SAID COMPANY WAS OUTSTANDING AND SIMILARLY IN THE BOOKS OF THE S AID COMPANY THIS AMOUNT IS OUTSTANDING UNDER THE SCHEDULE OF LOANS A ND ADVANCES. THE ASSESSEE HAS ALSO CLAIMED TO HAVE PAID INTEREST ON THE OUTSTANDING LOAN. HENCE, THE ARGUMENT OF THE ASSESSEE WAS REJECTED. AS THIS LOAN HAVE BEEN TAKEN FROM THE SAID COMPANY IN WHICH THE ASSESSEE HAS SUBSTANTIAL INTEREST, THEREFORE, AN AMOUNT OF RS.8,23,964/- WAS TREATED AS DEEMED DIVIDEND ASSESSABLE IN HAND OF ASSESSEE U/S 2 (22) (E) OF THE IT ACT. THE ADDITION WAS ACCORDINGLY MADE. THE LD. CIT (A) NOTE D THAT THE ASSESSEE DO NOT PRODUCE ANY EVIDENCE OR THE DOCUMENTS ON THE BA SIS OF WHICH THE ASSESSEE CLAIMED IT WAS A TRANSACTION BETWEEN TWO P ERSONS, THE ADDITION ACCORDINGLY CONFIRMED. ITA NO.6890 /DEL/2014 3 5. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAS BEEN CARRYING ON BUSINESS ON A WORKS CONTRACT FOR GOVERN MENT DEPARTMENTS UNDER PARTNERSHIP CONCERN M/S S.L. ENTERPRISES. THE ASSESSEE HOLDS SHARE HOLDING MORE THAN 10% IN M/S RAMSAN COMMUNICATION L IMITED. DURING THE YEAR THERE WERE COMMERCIAL TRANSACTIONS BETWEEN THE ASSESSEE AND THE SAID COMPANY WHICH IS CLEAR FROM LEDGER ACCOUNT OF THE SAID COMPANY IN THE BOOKS OF THE ASSESSEE. IT WOULD SHOW THE AMOUNT PA ID BY ASSESSEE TO SAID COMPANY AND THE AMOUNT RECEIVED BY THE ASSESSEE FOR THE SAID COMPANY. COPY OF WHICH IS FILED AT PAGE 54 OF THE PAPER BOOK . THE CREDIT AMOUNT COMES TO RS.1,36,95,724/- AND DEBIT AMOUNT IS OF R S.24,00,000/-, THUS THE BALANCE OUTSTANDING WAS RS.1,12,95,724/-. SINCE IT WAS A COMMERCIAL TRANSACTION, THE ASSESSEE HAS PAID INTEREST OF RS.1 ,06,360/- AND HAS DEDUCTED TDS OF RS.10,636/- (PB-95). THE INTEREST PAID HAS BEEN CLAIMED AS DEDUCTION AND ASSESSED TO TAX IN THE HANDS OF TH E SAID COMPANY. THE LD. COUNSEL FOR ASSESSEE SUBMITTED THAT IDENTICAL I SSUE WAS CONSIDERED BY ITAT, DELHI BENCH IN THE CASE SHRI DEVEN CHACHRA VS . DCIT IN ITA NO.4209-4210/D/2017 DATED 02.11.2017 IN WHICH THE A SSESSEE SUBMITTED THE CHART POINTING OUT THE INTEREST INCOME RECEIVED BY THE COMPANY IN ASSESSMENT YEAR UNDER APPEAL AS WELL AS IN THE PREC EDING AND SUBSEQUENT YEARS AND, HELD AS UNDER :- 8. FROM THE ABOVE, IT IS EVIDENT THAT M/S. SUPERIO R FILMS (P) LTD. IS RECEIVING SUBSTANTIAL INTEREST FROM THE GROUP CONCE RNS AS WELL AS OTHERS RIGHT FROM ASSESSMENT YEAR 2007-08 TO 2016-17. FROM PAGE 6 ONWARDS OF THE WRITTEN SUBMISSIONS, THE ASSESSEE HAS GIVEN THE TRA NSACTIONS BETWEEN M/S SUPERIOR FILMS (P) LTD. AND OTHER GROUP CONCERNS, F ROM WHICH, IT IS EVIDENT THAT THERE WERE SEVERAL TRANSACTIONS OF THE PAYMENT AND RECEIPT OF THE MONEY DURING THE YEARS UNDER APPEAL. CONSIDERING TH E TOTALITY OF ABOVE ITA NO.6890 /DEL/2014 4 FACTS, WE HAVE NO HESITATION TO HOLD THAT M/S SUPER IOR FILMS (P) LTD. USED TO ADVANCE THE MONEY FOR EARNING INTEREST INCOME TO VA RIOUS CONCERNS WHICH INCLUDED GROUP CONCERNS ALSO. THE ADVANCING OF MONE Y WAS A REGULAR COURSE OF BUSINESS FOR M/S SUPERIOR FILMS (P) LTD., NOT ON LY IN THE YEARS UNDER APPEAL BUT ALSO IN THE PRECEDING AS WELL AS SUBSEQU ENT YEARS. IN VIEW OF THE ABOVE, WE HAVE NO HESITATION TO HOLD THAT ADVANCING OF MONEY BY M/S SUPERIOR FILMS (P) LTD. TO THE GROUP CONCERNS WAS D URING THE COURSE OF NORMAL COURSE OF ADVANCING MONEY FOR THE PURPOSE OF EARNING INTEREST. 9. IN THE CASE OF PRAAIP KUMAR MALHOTRA (SUPRA), HON'BLE HIGH COURT OF CALCUTTA HAS HELD AS UNDER :- 'HELD, ALLOWING THE APPEAL, THAT FOR RETAINING THE BENEFIT OF LOAN AVAILED OF FROM THE BANK IF DECISION WAS TAKEN TO GIVE ADVANCE TO THE ASSESSEE SUCH DECISION WAS NOT TO GIVE GRATUITOUS ADVANCE TO ITS SHAREHOLDER BUT TO PROTECT THE BUSINESS INTEREST OF THE COMPANY. THE SUM OF RS .20,75, OOO COULD NOT BE TREATED AS DEEMED DIVIDEND' 10. IN CIRCULAR NO.19/2017, PARAGRAPH 3, THE CBDT H AS ALSO HELD THAT TRADE ADVANCES, WHICH ARE IN THE NATURE OF COMMERCI AL TRANSACTIONS WOULD NOT FALL WITHIN THE AMBIT OF THE WORD ADVANCE IN SECTION 2 (22)(E) OF THE ACT. NO CONTRARY DECISION WAS BROUGHT TO OUR KNOWLEDGE. 11. IN THE CASE UNDER CONSIDERATION, THE ADDITIO N U/S 2(22)(E) IS MADE IN THE CASE OF AN ASSESSEE WHO IS AN INDIVIDUAL. ADMIT TEDLY, NO ADVANCE OR BORROWED MONEY IS RECEIVED BY THE ASSESSEE FROM THE CONCERNS IN WHICH THE ASSESSEE IS A SHAREHOLDER. THERE IS A TRANSACTION O F ADVANCING OF MONEY BY M/S SUPERIOR FILMS (P) LTD. TO THE GROUP CONCERNS I N THE NORMAL COURSE OF BUSINESS. IN VIEW OF THE ABOVE DECISION OF HON'BLE HIGH COURT OF CALCUTTA AS WELL AS CBDT'S CIRCULAR, SECTION 2(22)(E) IS NOT AP PLICABLE IN THE FACTS OF THE CASE UNDER APPEAL BEFORE US. WE, THEREFORE, RESPECT FULLY FOLLOWING THE ABOVE DECISION OF HONBLE HIGH COURT OF CALCUTTA AS WELL AS CBDTS CIRCULAR , DELETE THE EDITION MADE U/S 2(22)(E) OF THE ACT. ITA NO.6890 /DEL/2014 5 7. HE HAS REFER TO PAGE NO. 94 OF THE PAPER BOOK WH ICH IS LEDGER ACCOUNT OF INTEREST RECEIVED AND PAPER BOOK PAGE NO.98, THE DETAILS OF INTEREST PAID FROM A. Y. 2006-07 TO A. Y. 2014-15. THE LD. COUNS EL FOR ASSESSEE SUBMITTED THAT SIMILAR AMOUNT WAS ADVANCED IN EARLI ER YEARS AS WELL AS IN SUBSEQUENT YEARS ON WHICH NO ADDITION HAVE BEEN MAD E. COPY OF THE LEDGER ACCOUNT IS ALSO FILE IN 117 OF THE PAPER BOOK. LD. COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT IT HAS BEEN CONSISTENCY H ELD THAT A TRANSACTION ON WHICH INTEREST HAD BEEN RECEIVED AND TAXED AS INCOM E, THE SAID TRANSACTION IS A COMMERCIAL TRANSACTION BETWEEN ASSESSEE AND TH E SAID COMPANY AND THEREFORE, SUCH SUM CANNOT BE REGARDED DEEMED DIVID END U/S 2 (22) (E) OF THE IT ACT. IN THE WRITTEN SUBMISSION HE HAS RELIE D UPON THE DECISION OF ITAT KOLKATA BENCH IN THE CASE OF SMT. SANGITA VS. ITO IN ITA NO.1817/DEL/2009 FOR A. Y. 2006-07 DATED 11.03.2016 IN WHICH JUDGMENT OF THE CALCUTTA HIGH COURT IN THE CASE OF PRADIP KU MAR MALHOTRA VS. CIT REPORTED IN 338 ITR 538 HAVE BEEN FOLLOWED, IT WAS HELD :- 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ONE OF THE MAIN CONTENTIONS RAISED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEA RING BEFORE US IS THAT THE LOAN IN QUESTION TREATED AS DEEMED DIVIDEND UNDER S ECTION 2 (22) (E) BY AUTHORITIES BELOW WAS TAKEN BY THE ASSESSEE FROM M/ S. SURYA BUSINESS PVT. LIMITED ON INTEREST AND SINCE THE SAID COMPANY WAS COMPENSATED BY WAY OF INTEREST PAID BY THE ASSESSEE ON LOAN, THE ASSES SEE IN REAL SENSE DID NOT DERIVE ANY BENEFIT FROM THE FUNDS OF THE COMPANY SO AS TO ATTRACT THE PROVISIONS OF SECTION 2 (22) (E). ALTHOUGH THE LD. D. R. HAS VEHEMENTLY OPPOSED THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE BY SUBMITTING THAT THE PAYMENT OF INTEREST ALONE CANNOT BE CONSID ERED FROM THE BENEFIT ANGLE AS ENVISAGED UNDER SECTION 2 (22) (E), IT IS OBSERVED THAT THE JUDICIAL PRONOUNCEMENTS CITED BY THE LD. COUNSEL FOR THE ASS ESSEE CLEARLY SUPPORT THE CASE OF THE ASSESSEE. ITA NO.6890 /DEL/2014 6 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE LOAN WAS GIVEN TO THE ASSESSEE FOR FURTHER EXTENSION OF BUSINESS, THEREFORE, TRANSACTION WAS OUTSIDE THE PURVIEW OF SECTION 2 (22) (E) OF THE IT ACT. HE HAS SUBMITTED THAT RULE OF CONSISTENCY APPLY TO THE INCOME TAX PR OCEEDINGS AND RELIED TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F CIT VS. EXCEL INDUSTRIES LIMITED 358 ITR 295. ON THE OTHER HAND, LD. DR RELIED ON ORDERS OF AUTHORITIES BELOW. 8.1 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE MATERIAL ON RECORD. THE LD. COUNSEL FOR ASSESSEE SUBMITTED T HAT SINCE IT WAS A COMMERCIAL TRANSACTION AND SIMILAR TRANSACTIONS WER E ENTERED INTO IN EARLIER AND SUBSEQUENT ASSESSMENT YEAR AND NO ADDIT ION HAVE BEEN MADE ON ACCOUNT OF DEEMED DIVIDEND AGAINST THE ASSESSEE, THEREFORE, RULE OF CONSISTENCY DO APPLY. THE ASSESSEE FURTHER CLAIMED THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT TO SELL WITH M/S. RAMSAN COMMUNICATION LIMITED FOR SALE OF THE INDUSTRIAL LAND IN DELHI. THEY WANTED TO SHIFT THEIR BUSINESS TO DELHI, THEREFORE, ADVANCE OF RS.1.12 CR ORES WAS TREATED AGAINST THE PURCHASE OF INDUSTRIAL PLOT. THE ASSESSEE DEDUC TED TDS ON THE INTEREST PAID (PB-95), THEREFORE, IT WAS A COMMERCIAL TRANSA CTION ENTERED INTO BETWEEN INTO BETWEEN ASSESSEE AND M/S. RAMSAN COMMU NICATION LIMITED. SECTION 2 (22) (E) OF THE IT ACT WAS INSERTED TO BR ING WITHIN THE PURVIEW OF TAXATION ALL THOSE AMOUNTS WHICH ARE ACTUALLY A DIS TRIBUTION OF PROFITS BUT ARE DISBURSED AS LOAN. FURTHER IT IS PERTINENT TO N OTE, WHEN DIVIDENDS ARE DECLARED BY A COMPANY, IT IS SOLELY THE SHAREHOLDER S, WHO BENEFIT FROM THE TRANSACTION, THUS SECTION 2 (22) (E) OF THE ACT, CO VERS ONLY SUCH SITUATION WHERE THE SHAREHOLDER ALONE BENEFITS FROM THE LOAN TRANSACTION, WHEREAS IF THE COMPANY RECEIVES SOME BENEFITS, IT WOULD TERMED AS A COMMERCIAL TRANSACTION. IN THE INSTANT CASE, THE LOAN WAS GIV EN TO THE ASSESSEE FOR FURTHER EXPANSION OF BUSINESS AS THE SAID COMPANY I NTENDED TO TAKE OVER THE BUSINESS OF THE ASSESSEE HENCE WOULD BE AN INDI RECT BENEFICIARY FROM SUCH TRANSACTION. FURTHER THE ASSESSEE HAD PAID INT EREST ON THE SAID ITA NO.6890 /DEL/2014 7 AMOUNT WHICH HAS BENEFITED THE SAID COMPANY. THUS, IT WAS A COMMERCIAL TRANSACTION BETWEEN THE PARTIES. SIMILAR TRANSACTIO N WAS ACCEPTED AS COMMERCIAL TRANSACTION BETWEEN THE PARTIES IN EARLI ER AS WELL AS SUBSEQUENT YEARS IN WHICH INTEREST HAS ALSO BEEN PAID AND NO A DVERSE INFERENCE HAVE BEEN DRAWN AGAINST THE ASSESSEE, THEREFORE, RULE OF CONSISTENCY DO APPLY WITH THE INCOME PROCEEDINGS AND THE ASSESSING OFFIC ER WITHOUT BRINGING ANY FURTHER EVIDENCE AGAINST THE ASSESSEE SHOULD NOT HA VE TAKEN A DIFFERENT VIEW AGAINST THE ASSESSEE. THE DECISIONS RELIED UPO N BY LD. COUNSEL FOR THE ASSESSEE SQUARELY APPLY TO THE FACTS AND THE CIRCUM STANCES OF THE CASE. THE ASSESSEE PRODUCE SUFFICIENT EVIDENCE ON THE RECORD TO JUSTIFY THAT IT WAS A COMMERCIAL TRANSACTION BETWEEN THE PARTIES NOT ONLY IN ASSESSMENT YEAR UNDER APPEAL BUT IN PRECEDING AND SUBSEQUENT YEARS, THEREFORE, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN INVOKING PR OVISION OF SECTION 2 (22) (E) OF THE IT ACT AGAINST THE ASSESSEE FOR MAKING T HE ADDITION. IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE THE ORDERS OF THE AU THORITIES BELOW AND DELETE THE ADDITION OF RS.8,23,964/-. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 9. ON GROUND NO.2, THE ASSESSEE CHALLENGED THE DISA LLOWANCE OF RS.3,00,000/- ON ACCOUNT OF LABOUR CHARGES. 10. THE ASSESSEE FURNISHED THE DETAILS OF MONTH WIS E LABOUR CHARGES INCURRED BY HIM. FROM THE DETAILS IT WAS OBSERVED T HAT EXPENDITURE HAS SUDDENLY INCREASED MANY FOLD IN THE MONTH OF MARCH, 2011. THE ASSESSEE EXPLAINED THAT HE IS IN BUSINESS OF ELECTRIFICATION OF GOVERNMENT DEPARTMENT. FOR THIS, THE ASSESSEE RECEIVES CONTRAC TS/ TENDER FROM GOVERNMENT AND BECAUSE OF THIS KIND OF BUSINESS, TH ERE ARE QUITE VARIATIONS IN AMOUNT RECEIVED FROM THEM/ SALE-PROCEEDS AND THE LABOUR AND CONTRACT STAFF EXPENSES. IT IS DIFFICULT TO CORRELATE THE EX PENSES FROM ONE MONTH TO ANOTHER. ALSO, IN THIS KIND OF INDUSTRY IN WHICH TH E ASSESSEE WORKS, INVOLVES A LOT OF CONTRACTUAL WORK WITH THE PEOPLE WORKING U NDER UNORGANIZED SECTOR. ITA NO.6890 /DEL/2014 8 THE ASSESSEE MAKES ADVANCE PAYMENTS TO THE CONTRACT ORS ON A MONTHLY BASIS AND DEDUCTS TDS. HOWEVER, THE EXPENSES CAN O NLY BE BOOKED WHEN THE INVOICE IS RECEIVED BY THE ASSESSEE. THE ASSESS ING OFFICER, HOWEVER, IN THE ABSENCE OF DOCUMENTARY EVIDENCE SUCH AS INVOICE S OR BILLS RAISED BY THE SAID CONTRACTOR DISALLOWED RS.3,00,000/-. THE LD. C IT (A) ON THE SAME REASONING CONFIRMED THE ADDITION BECAUSE MOST OF TH E PAYMENTS ARE MADE IN CASH AND THERE ARE DISCREPANCY LIKE NON AVAILABI LITY OF NAMES, ADDRESS AND SIGNATURES ON THE RECEIPTS. 11. THE LD. COUNSEL FOR ASSESSEE SUBMITTED THAT IT IS AN AD-HOC ADDITION, WITHOUT BRINING ANY MATERIAL AGAINST THE ASSESSEE. NO DISALLOWANCE HAVE BEEN MADE IN EARLIER ORDER AS WELL IN SUBSEQUENT YE AR. RS.1,50,000/- WAS ONLY DISALLOWED IN PRECEDING ASSESSMENT YEAR 2010-1 1 WHICH IS UNDER CHALLENGE IN APPEAL SEPARATELY. 12. ON THE OTHER HAND LD. DR HEAVILY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 13. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE OPINION THAT ADDITION IS AD-HOC IN NATURE AND CANNOT BE SUSTAINE D. THE TRIBUNAL IN A. Y. 2010-11 IN ITA NO.5594/2014 DELETED SIMILAR ADDI TION VIDE ORDER OF EVEN DATE. THE ASSESSEE EXPLAINED THE REASONS FOR VARIAT IONS, WE, THEREFORE DELETE THE ADDITION OF RS.3,00,000/-. THIS GROUND OF APPEA L OF ASSESSEE IS ALLOWED. 14. ON GROUND NO.3, ASSESSEE CHALLENGED THE DISALLO WANCE OF RS.29,34,000/- ON ACCOUNT OF COMMISSION U/S 37 (1) OF THE IT ACT. THE ASSESSING OFFICER OBSERVED FROM THE P & L ACCOUNT T HAT AN AMOUNT OF RS.29,34,000/- HAS BEEN DEBITED UNDER THE HEAD COMM ISSION. THE ASSESSEE WAS REQUIRED TO FILE DETAILS OF SUCH COMMISSION PAI D I.E. NAME, ADDRESS WITH PAN NUMBER AND ALSO JUSTIFICATION FOR THE PAYMENT O F COMMISSION. THE ASSESSEE SUBMITTED THAT THE DETAILS OF THE COMMISSI ON BEFORE THE ASSESSING ITA NO.6890 /DEL/2014 9 OFFICER AND SUBMITTED HE HAS PAID THE AMOUNT AS COM MISSION FOR REPRESENTING HIM BEFORE CERTAIN PARTIES TO GET THE TENDER. THE COPY OF THE CONFIRMATIONS RECEIVED FROM THEM ALONGWITH TDS CERT IFICATES ISSUED TO THEM WERE FILED ALONGWITH DETAILS EXPLAINING AS TO HOW T HE COMMISSION AGENTS REPRESENTED BEFORE THE CONCERNED AUTHORITIES WITH B ILLS AND THE PURPOSE FOR WHICH THE COMMISSION HAVE BEEN PAID. THE ASSESSING OFFICER ASKED THE ASSESSEE TO SHOW-CAUSE WHY THE AMOUNT PAID AS COMMI SSION FOR PROCURING WORK ORDERS FROM THE AGENCIES SHOULD NOT BE DISALLO WED AS BEING ILLEGAL IN NATURE AS NO MIDDLE MAN IS ALLOWED IN GOVERNMENT TE NDERING PROCESS. THE ASSESSEE EXPLAINED THAT SAID AMOUNT WAS PAID AS COM MISSION FOR REPRESENTING HIM BEFORE CERTAIN PARTIES TO GET THE TENDER. THESE PARTIES GAVE PRESENTATION ON BEHALF OF THE ASSESSEE AS TO T HE ELECTRIC SUPPLY SYSTEM IN A BUILDING. THE PRESENTATION INCLUDE THE SPECIF ICATIONS THAT SHOULD BE INCLUDED IN THE ELECTRIC SUPPLY SYSTEM OF A BUILDIN G LIKE THE INCLUSION OF SUB-STATION EQUIPMENTS, TRANSFORMERS, HT PANELS, EA RTHING SYSTEM, SAFETY EQUIPMENTS, EMERGENCY M. V. PANEL ETC. THE A SSESSING OFFICER, HOWEVER, DID NOT ACCEPT EXPLANATION OF ASSESSEE. TH E ASSESSING OFFICER NOTED THAT ASSESSEE HAS NOT BEEN ABLE TO JUSTIFY TH E PAYMENTS ON THE BASIS OF ANY SERVICES RENDERED BY THE PERSONS TO WHOM COM MISSION IS BEING PAID. THE PRESENTATION IS ROUTINE FUNCTION. THERE IS NO A GREEMENT BETWEEN THE PARTIES. IT IS NOT EXPLAINED SUCH SERVICES HAVE BEE N RENDERED AND SAME IS NOT SUPPORTED BY ANY EVIDENCE. FURTHER COMMISSION I S PAID TO THE COMMISSION AGENTS FOR PROCURING ORDERS FROM GOVERNM ENT AGENCY WHICH IS NOT ALLOWABLE AS PER EXPLANATION TO SECTION 37 (1) OF THE IT ACT. THE ASSESSING OFFICER ACCORDINGLY DISALLOWED THE ENTIRE AMOUNT OF THE COMMISSION PAID. THE LD. CIT (A) ON THE SAME REASO NING ALSO CONFIRM THE ADDITION. 15. THE COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSION MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE DETAIL S OF PAYMENT TO THE COMMISSION AGENTS WERE FILED AND EXPLAINED THAT THE RE IS NO RELATION ITA NO.6890 /DEL/2014 10 BETWEEN ASSESSEE AND THE COMMISSION AGENTS. THE SIM ILAR COMMISSION PAYMENT WAS PAID IN EARLIER YEAR AS WELL AS IN SUBS EQUENT YEARS WHICH HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. THE ASS ESSEE DEDUCTED THE TDS ON THE AMOUNT PAID AND ISSUED TDS CERTIFICATE. THE ASSESSEE WORKS FOR THE GOVERNMENT DEPARTMENTS, THEREFORE, THE COMMISSION A GENTS REPRESENT THE ASSESSEE BEFORE THE AGENCIES ON BEHALF OF THE ASSES SEE AND IN LIEU THEREOF THE COMMISSION HAVE BEEN PAID. CONFIRMATION AND TDS CERTIFICATE HAVE BEEN FILED. THE ASSESSEE EXPLAINED THE REASONS FOR PAYMENT OF COMMISSION. IF ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXP LANATION OF ASSESSEE, HE COULD HAVE SUMMONED THE COMMISSION AGENTS U/S 131 T O VERIFY THE TRANSACTION. THE ASSESSEE HAD DISCHARGED THE BURDEN OF PROVING GENUINENESS OF PAYMENT MADE TO COMMISSION AGENTS. NO ENQUIRY MADE BY THE ASSESSING OFFICER ON THE DOCUMENTARY EVIDENCE F ILED BY THE ASSESSEE. HE HAS RELIED UPON THE ORDER OF TRIBUNAL IN THE CAS E OF MOBILE COMMUNICATION (INDIA) P. LTD. VS. DCIT, 125/ITD /30 9 (DELHI) IN PARA 10.1 IN WHICH THE TRIBUNAL REFERRED TO ITS DECISION IN T HE CASE OF NESTOR PHARMACEUTICALS LTD. V. DCIT [IT NOS. 2535 AND 253 6 (DELHI) OF 2006] ETC. IN WHICH IT WAS HELD AS UNDER :- '12. HERE, WE FIND THAT THE ASSESSING OFFICER HAS I N REGARD TO THE COMMISSION PAYMENT TO THE AGENTS WHO HAD ASSISTED T HE ASSESSEE TO DEAL WITH THE GOVERNMENT AGENCIES HAVE BEEN SPECIFICALLY EARMARKED AND DISALLOWED ON THE GROUND THAT THERE WAS NO NECESSIT Y OF AN AGENT WHILE DEALING WITH THE GOVERNMENT. THOUGH, IT IS VERY MUC H TRUE THAT THE GOVERNMENT DOES NOT DEAL WITH THE MIDDLEMAN, IT DOE S NOT MEAN THAT THERE IS NO ROLE FOR AN AGENT TO PLAY WHEN AN ASSESSEE IS DEALING - WITH THE GOVERNMENT. THE TRANSACTIONS AND THE DEALINGS WITH THE GOVERNMENT OBVIOUSLY CANNOT BE DONE THROUGH AN AGENT BUT THE A GENT CAN ASSIST AN ASSESSEE IN OBTAINING SUPPLY AND FACILITATING OF IN FORMATION WHICH ARE REQUIRED FOR THE ASSESSEE. THE EXPLANATION OF THE A SSESSEE THAT THE AGENTS ASSISTED THE ASSESSEE IN THE PRE-TENDER AND THE POS T-TENDER ACTIVITIES IS CLEARLY BORNE OUT OF THE EVIDENCES WHICH ARE PART O F THE SEIZED MATERIAL. ITA NO.6890 /DEL/2014 11 THIS BEING SO, IT CANNOT BE SAID THAT NO SERVICES H AVE BEEN RENDERED BY THE AGENTS TO THE ASSESSEE. IN THE CIRCUMSTANCES, WE AR E OF THE VIEW THAT THE LEARNED CIT(A) WAS RIGHT IN DELETING THE DISALLOWAN CE OF THE COMMISSION AS MADE BY THE ASSESSING OFFICER. HIS IMPUGNED ORDERS ON THIS ISSUE FOR ALL THE SEVEN YEARS UNDER CONSIDERATION ARE, THEREFORE, UPH ELD AND THESE APPEALS OF THE REVENUE ARE DISMISSED.' 16. ON THE OTHER HAND DR HEAVILY RELIED ON THE ORDERS O F THE AUTHORITIES BELOW. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. IT IS A SETTLED LAW THAT DISA LLOWANCE OF EXPENSES WOULD NOT BE MADE ON ASSUMPTION AND PRESUMPTIONS. THE BUR DEN IS UPON ASSESSEE TO PROVE THE FACT THAT SERVICES HAVE BEEN RENDERED BY THE COMMISSION AGENTS IN THE COURSE OF BUSINESS OF THE ASSESSEE. IN THE INSTANT CASE, THERE IS NO DISPUTE THAT THE ASSESSEE WORKED WITH THE VARIOUS GOVERNMENT AGENCIES. THE ASSESSEE IS AN INDIVIDUAL AND CARRYING ON BUSINESS OF ELECTRIC, CONTRACTOR IN THE NAME OF M/S . S. L. ENTERPRISES PROP. CONCERN. THE ASSESSEE HAS SHOWN BETTER GP AND NP IN ASSESSMENT YEAR UNDER APPEAL AS COMPARED TO EARLIER YEAR. THE ASSES SING OFFICER CONSIDERING THE SAME ACCEPTED THE FINANCIAL RESULTS OF THE ASSE SSEE. THE ASSESSEE EXPLAINED THAT IN THE NATURE OF THE BUSINESS OF THE ASSESSEE, COMMISSION AGENT TO REPRESENT HIM BEFORE VARIOUS AGENCIES FOR GETTING THE WORK AND TO COMPLETE THE WORK BY GIVING PRESENTATION BEFORE THE DIFFERENT AGENCIES OF THE GOVERNMENT. THE ASSESSEE EXPLAINED THAT THE COMMISS ION WAS PAID TO VARIOUS PARTIES TO REPRESENT THE ASSESSEE BEFORE VA RIOUS AGENCIES FOR COMPLETION OF THE WORK TAKEN ON BEHALF OF THE ASSES SEE. THE ASSESSEE EXPLAINED ACTUAL SERVICES HAVE BEEN RENDERED BY THE COMMISSION AGENT IN THE COURSE OF BUSINESS OF THE ASSESSEE. IT HAS ALS O NOT BEEN DISPUTED THAT THE AGENTS HAD CONFIRMED THE RENDERING OF SERVICES. IT IS ALSO NOT IN DISPUTE THAT COMMISSION EXPENSES INCURRED AND PAID BY ASSES SEE. THE COMMISSION AGENTS ARE NOT RELATED TO ASSESSEE. THE NATURE OF BUSINESS OF ASSESSEE IS ITA NO.6890 /DEL/2014 12 SAME AS WAS IN EARLIER YEARS AS WELL AS IN SUBSEQUE NT YEARS. THE ASSESSING OFFICER HAS ACCEPTED THE SIMILAR PAYMENT OF COMMISS ION IN EARLIER YEAR AS WELL AS IN SUBSEQUENT YEARS AND NO DISALLOWANCE HAV E BEEN MADE. THUS, THE RULES OF CONSISTENCY DO APPLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE. IF THE ASSESSING OFFICER HAD ANY DOUBT ON THE EXPLANATION OF THE ASSESSEE, HE COULD HAVE VERIFIED THE FACTS BY SUMMO NING THE COMMISSION AGENTS BUT ASSESSING OFFICER DID NOT MAKE ANY ENQUI RY FROM THE COMMISSION AGENTS. THE ASSESSING OFFICER DISALLOWED THE COMMISSION BECAUSE OF EXPLANATION TO SECTION 37 (1) OF THE IT ACT. THIS SECTION PROHIBITS THE INCURRING OF EXPENDITURE BY AN ASSESSEE WHEN IT IS AN OFFENCE OR PROHIBITED BY LAW. THE ASSESSING OFFICER FURTHER H AS NOT BROUGHT ANYTHING ON RECORD IF BY MAKING THE PAYMENT OF COMMISSION TO THE AGENTS WHAT OFFENCE HAVE BEEN COMMITTED BY THE ASSESSEE AND UND ER WHICH LAW COMMISSION PAYMENT MADE BY ASSESSEE WAS PROHIBITED BY LAW. SINCE ASSESSEE IS AN INDIVIDUAL, THEREFORE, IT MAY NOT BE POSSIBLE FOR HIM TO REPRESENT BEFORE VARIOUS AGENCIES FOR PROCURING TEN DER OR FOR COMPLETION OF THE WORK, THEREFORE, IF THE ASSESSEE HAS ASSIGNED T HIS JOB TO THE COMMISSION AGENTS TO REPRESENT HIM BEFORE THE GOVERNMENT AGENC Y THERE IS NO OFFENCE COMMITTED BY HIM. THE DECISION OF THE DELHI TRIBUNA L IN THE CASE OF MOBILE COMMUNICATIONS (INDIA) P. LTD. VS. DCIT (SUPRA) APP LY TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 18. THE ABOVE DISCUSSION AND MATERIAL AVAILABLE ON RECORD CLEARLY ESTABLISH THAT THE ASSESSEE HAS INCURRED ABOVE EXPE NSES WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, SAME IS AL LOWABLE DEDUCTION. THE FINANCIAL RESULTS OF THE ASSESSEE ARE BETTER AS COM PARED TO EARLIER YEARS AND SUBSEQUENT YEARS, THEREFORE, THERE WERE NO REASON F OR ASSESSEE TO INFLATE THE EXPENSES. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY JUSTIFICATION TO SUSTAIN T HE ADDITION. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIE S BELOW AND DELETE THE ADDITION. THIS GROUND OF THE ASSESSEE IS ALLOWED. ITA NO.6890 /DEL/2014 13 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON 01.08.2018. SD/- SD/- (L. P. SAHU) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *NEHA* DATE:- 01.08.2018 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO.6890 /DEL/2014 14 DATE OF DICTATION 23.07.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 25.07.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 1/8/2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER