Tirumala Seven Hills Pvt. Ltd., Kolkata V. JCIT, R-4, KOLKATA, Kolkata

ITA 782/KOL/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1583 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 25-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MD USMAN
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Bogus purchase; Question of law
• Section: 133(6); 32; 131; 68

Judgement Text

1 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 782/KOL/2016 ASSESSMENT YEAR: 2011-12 TIRUMALA SEVEN HILLS PVT. LTD. (PAN: AAACT9861F) VS. JOINT COMMISSIONER OF INCOME-TAX, RANGE-4, KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 05.09.2018 DATE OF PRONOUNCEMENT 22.11.2018 FOR THE APPELLANT SHRI MIRAJ D. SHAH, FCA FOR THE RESPONDENT MD. USMAN, CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER DATED 25.02.2016 PASSED U/S 250/143(3) BY THE LD. COMMISSIONER OF INCOME-TAX (A PPEALS)-6, KOLKATA (LD. CIT(A)) FOR THE ASSESSMENT YEAR 2011-12. 2. THE MAIN GRIEVANCE OF THE ASSESSEE IN THIS APPEA L IS AGAINST THE LD. CIT(A)S ACTION OF CONFIRMING THE DISALLOWANCE OF COMMISSION AND AN NUAL MAINTENANCE EXPENSES AMOUNTING TO RS.1,92,65,164/- AND RS.4,40,58,520/- MADE BY TH E AO. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINE SS OF SALE & PROVIDING MAINTENANCE SERVICES OF IMPORTED TELECOMMUNICATION EQUIPMENT. T HE ASSESSEE IMPORTS FOREIGN TELECOM EQUIPMENTS FROM JAPAN, CHINA, FINLAND, FRANCE& USA. THE ASSESSEE ALSO PROVIDES AGENCY SERVICES TO REPUTED FOREIGN TELECOM EQUIPMENT MANUF ACTURING COMPANIES. THE CUSTOMERS OF THE ASSESSEE COMPRISED OF BOTH PRIVATE PLAYERS SUCH AS TATA TELESERVICES, RELIANCE ETC. AND AS WELL AS GOVERNMENT COMPANIES SUCH AS BSNL & MTNL ETC. IN THE COURSE OF ITS BUSINESS 2 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 THE ASSESSEE HAD APPOINTED LIAISON AGENTS TO PROVID E MARKETING SERVICES, FOR SOLICITING ORDERS, ENSURING TIMELY DELIVERY OF GOODS, COLLECTI ON OF PAYMENT ETC., TO THE CUSTOMERS WHO WERE LOCATED ACROSS INDIA AND ALSO RENDER AFTER SAL E SERVICES TO ITS TELECOM CUSTOMERS. THE ASSESSEE HAD ALSO APPOINTED SERVICE PARTNERS TO REN DER END-TO-END ANNUAL MAINTENANCE SERVICES IN RESPECT OF THE TELECOM EQUIPMENT SOLD T O THE CUSTOMERS. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE AO REQUIRED THE ASSESSEE TO EXPLAIN THE BUSINESS RESPONSE THE ASSESSEE FILED A DETAILED NOTE EXPLAINING ITS MODUS OPERANDI OF THE BUSINESS AND THE NATURE OF THESE PAYMENTS. THE AO ISSUED NOTICES U/S 133(6) TO THE TWO COMMISSION AGENTS AS WELL AS THE THREE SERVICE PROVIDERS, WHO WERE APPOINTED BY THE ASSESSEE AND THE NOTICES WENT UN- COMPLIED. HAVING REGARD TO THE FACT THAT THE NOTICE S WENT UN-SERVED, THE AO DISBELIEVED THE GENUINENESS OF THE PAYMENTS MADE BY THE ASSESSEE AN D ACCORDINGLY DISALLOWED THE COMMISSION EXPENDITURE AND ANNUAL MAINTENANCE EXPEN SES OF RS.1,92,65,165/- AND RS.4,40,58,520/- RESPECTIVELY. AGGRIEVED BY THE ASS ESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A)-6, KOLKATA, WHO CONFIR MED THE ACTION OF THE AO. 3. AT THE TIME OF HEARING, THE LD. AR OF THE APPELL ANT VEHEMENTLY OBJECTED TO THE DISALLOWANCE OF EXPENSES MADE BY THE AO. THE LD. AR TOOK US THROUGH THE EXTENSIVE DOCUMENTATION FURNISHED BEFORE THE LOWER AUTHORITIE S, WHICH WAS PLACED BEFORE US IN THE PAPER BOOK TO SUBSTANTIATE THE GENUINENESS OF THE E XPENDITURE. THE LD. AR FIRST EXPLAINED THE MODUS OPERANDI OF THE BUSINESS OF THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE PROCURED AND SUPPLIED TELECOMMUNICATION EQUIPMENTS TO PREMIE R TELECOM COMPANIES IN INDIA. THE MAJOR PRODUCTS DEALT WITH BY THE ASSESSEE WERE AS U NDER: 1) DEVICES RTXM/TRANSCEIVER RTXM VARIOUS MODEL 2) DRIVE TEST TOOL KIT 3) NEMOOUTDOOR KIT 4) SMPS30A 5) OTDR VARIOUS MODELS 6) POWER METER 7) SPLICING MACHINE 8) OPTICAL LINE PROTECTION SWITCH 9) NEMO OUTDOOR 10 10) CONVERTER ETC. 11) E1TESTER (SENTER) 3 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 4. IT WAS SUBMITTED THAT THE ORDERS FOR SUCH EQUIPM ENTS WERE NOT EASILY PROCURABLE. THE ASSESSEE WAS REQUIRED TO CONTINUOUSLY LIAISE WITH PURCHASE DEPARTMENTS OF THE RESPECTIVE TELECOM COMPANIES, PARTICIPATE IN TENDER PROCESS, P RICE NEGOTIATIONS AND THEREAFTER ENSURE TIMELY DELIVERY AND INSTALLATION OF TECHNICALLY SOP HISTICATED EQUIPMENTS AND THEREAFTER PROVIDE AFTER SALE SERVICES. IN ORDER TO CATER TO S UCH PREMIUM CUSTOMERS AND THAT TOO ACROSS INDIA, IT WAS NOT POSSIBLE FOR THE IN-HOUSE PERSONN EL OF THE ASSESSEE TO MARKET ITS PRODUCTS AND RENDER HOST OF ANCILLIARY SERVICES. CONSIDERING THE NATURE OF BUSINESS AND THE TECHNICAL COMPLEXITIES OF THE PRODUCT, THE ASSESSEE APPOINTED MARKETING CONSULTANTS WHO LIAISED ON THEIR BEHALF AND BUILD THE REPUTATION OF THE COMPAN Y WITH THESE TELECOM COMPANIES. THEY WOULD ALSO NEGOTIATE THE PRICE OF THE PRODUCTS WITH THE PRIVATE PLAYERS TO ENSURE THAT BEST PRICES ARE FINALIZED AND ASSIST IN THE TENDERING PR OCESS WITH THE PSU CUSTOMERS. THE TENDERING PROCESS WOULD ENTAIL BOTH TECHNICAL AND C OMMERCIAL BIDS AND HENCE IT WAS IMPERATIVE TO ENSURE THAT THESE PROCESSES WERE DULY EXECUTED SO AS TO SUCCESSFULLY OBTAIN THE ORDERS. ONCE THE ORDERS WERE RECEIVED, THE AGENTS W OULD LIAISE TO GET THE TECHNICAL DRAWINGS APPROVED AND THEREAFTER COORDINATE WITH THE LOGISTI CS TO ENSURE THAT THE EQUIPMENTS ARE DELIVERED IN A TIME BOUND MANNER. THEY WOULD ALSO C OORDINATE ITS INSTALLATION, COMMISSIONING AND RENDER AFTER SALES SUPPORT. APART FROM THE FOREGOING, THE MARKETING AGENTS WOULD ALSO ENSURE THAT THE PAYMENTS WERE TIM ELY COLLECTED FROM THESE TELECOM CUSTOMERS. HAVING REGARD TO THE RANGE OF MARKETING SERVICES PROVIDED BY THEM, IN LIEU THEREOF THE ASSESSEE WOULD PAY A FIXED RATE OF COMM ISSION FOR EACH PRODUCT SUCCESSFULLY MARKETED AND SOLD BY THEM. THE TERMS AND CONDITIONS OF THESE ARRANGEMENT AS WELL AS THE OBLIGATIONS OF THE ASSESSEE AS WELL AS THE CUSTOMER S WERE AGREED IN WRITING VIDE A DULY EXECUTED AGREEMENT, COPY OF WHICH WAS PLACED IN TH E PAPER BOOK. 5. THE LD. AR FURTHER DREW OUR ATTENTION TO THE SEV ERAL CORRESPONDENCE EXCHANGED BETWEEN THE COMPANY AND THE AGENTS AND ALSO THE SUB SEQUENT REVISION IN THE COMMISSION RATES DUE TO THE ENHANCED SCOPE OF WORK. THE LD. AR FURTHER INVITED OUR ATTENTION TO THE TAX INVOICES RAISED BY THE AGENTS, WHICH CONTAINED THE DETAILED DESCRIPTION OF THE EQUIPMENTS MARKETED BY THEM AND THE COMMISSION CHARGED IN TERM S OF THE SIGNED AGREEMENT. THE TAX INVOICES CONTAINED THE DETAILS OF PAN AND SERVICE T AX REGISTRATION NUMBER. HE FURTHER REFERRED TO THE CONFIRMATIONS OBTAINED FROM THE PAY EES IN RESPECT OF THE AGGREGATE 4 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 EXPENDITURE PAID TO THEM. HE FURTHER DREW OUR ATTE NTION TO THE LOWER TAX DEDUCTION CERTIFICATES U/S 197 ISSUED BY THE INCOME-TAX DEPAR TMENT TO THE PAYEES. HE THEREFORE SUBMITTED THAT THE TDS WAS DEDUCTED ON THE PAYMENTS AT THE APPROPRIATE LOWER RATES AS CERTIFIED BY THE INCOME-TAX AUTHORITIES AND ALL THE PAYMENTS WERE MADE THROUGH PROPER BANKING CHANNEL. IT WAS THUS SUBMITTED THAT THE AS SESSEE COMPANY HAD PROVIDED ALL THE RELEVANT DOCUMENTS & EVIDENCES WHICH IT WAS REQUIRE D TO ORDINARILY MAINTAIN IN THE COURSE OF BUSINESS TO SUBSTANTIATE THE GENUINENESS OF THE PAYMENTS AND THE MERE NON-COMPLIANCE BY THE PAYEES TO THE NOTICES ISSUED BY THE AO U/S 1 33(6) COULD NOT IPSO FACTO MAKE THESE PAYMENTS BOGUS. 6. SIMILARLY WITH REGARD TO THE PAYMENT OF ANNUAL M AINTENANCE SERVICE FEES, THE LD. AR OF THE APPELLANT DREW OUR ATTENTION TO THE FOLLOWIN G EVIDENCES FURNISHED BEFORE THE LOWER AUTHORITIES IN SUPPORT OF THE PAYMENTS MADE BY THE ASSESSEE. 1. COPIES OF THE APPOINTMENT LETTERS; 2. COPIES OF ACCEPTANCES FURNISHED; 3. COPIES OF THE RELEVANT CORRESPONDENCES; 4. COPIES OF THE TAX INVOICES; 5. CONFIRMATION OF ACCOUNTS; 6. CERTIFICATES U/S 197(1) PROVIDED BY PAYEES; 7. TDS CERTIFICATES ISSUED TO THE PAYEES; 8. SERVICE TAX REGISTRATION CERTIFICATES 7. THE LD. AR SUBMITTED THAT THE AUTHORITIES BELOW DID NOT BRING ON RECORD EVEN AN IOTA OF MATERIAL OR EVIDENCE TO PROVE ANY DEFECT OR FALS ITY IN THE DOCUMENTARY EVIDENCES SUBMITTED BY THE ASSESSEE BUT HARPED ON THE ALLEGED NON-COMPLIANCE OF NOTICES BY THE PAYEES. IT WAS SUBMITTED THAT THE ASSESSEE HAD PLA CED THE COPIES OF EACH AND EVERY AGREEMENT ENTERED INTO WITH THE PAYEES IN RESPECT O F EACH PAYMENT MADE ALONG WITH COPIES OF THE TAX INVOICES & RELEVANT SUPPORTING. THE PAYE ES HAD CHARGED SERVICE TAX @ 12.36% ON THE INVOICES AND FURNISHED THEIR SERVICE TAX REGIST RATION CERTIFICATES TO THE ASSESSEE COMPANY. THE BANK ACCOUNT OF THE ASSESSEE FURTHER ESTABLISHE D THAT THE PAYMENTS WERE MADE THROUGH PROPER BANKING CHANNEL. FURTHERMORE, EACH PAYEE HAD HAD FURNISHED LOWER WITHHOLDING TAX CERTIFICATE OBTAINED U/S 197 FROM THE INCOME-TAX DE PARTMENT AND IT IS IN TERMS OF THAT CERTIFICATE THE ASSESSEE HAD WITHHELD LOWER TDS ON THE PAYMENTS. THE LD. AR SUBMITTED 5 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 THAT NEITHER THE AO NOR THE LD. CIT(A) DISPUTED THE CORRECTNESS AND GENUINENESS OF THE CERTIFICATE ISSUED BY THE DEPARTMENT U/S 197 OF THE ACT. IN VIEW OF THESE EVIDENCES THE LD. AR SUBMITTED THAT THE SOLE PREMISE ON WHICH THE LOW ER AUTHORITIES JUSTIFIED THE IMPUGNED DISALLOWANCE I.E. NON-SERVICE OF NOTICES U/S 133(6) , WAS UNJUSTIFIED AND UNSUSTAINABLE ON FACTS & IN LAW AND PRAYED THAT THE ORDERS OF THE LO WER AUTHORITIES BE REVERSED AND THE DISALLOWANCE BE DELETED. IN SUPPORT OF ITS CLAIM, T HE LD. AR RELIED ON THE JUDGMENTS OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF INBUILT MERCHANTS PVT. LTD. (G.A. NO. 3825 OF 2013) AND GUJARAT HIGH COURT IN THE CASE OF CIT VS. NANGALIA FABRICS PVT. LTD (40 TAXMANN.COM 206). 8. ON THE OTHER HAND THE LD. DR VEHEMENTLY SUPPORTE D THE ORDER OF THE LOWER AUTHORITIES. HE SUBMITTED THAT THE AO HAD CONFRONTE D THE ASSESSEE ABOUT THE NON-SERVICE OF NOTICES AND EVEN THEREAFTER THE ASSESSEE WAS UNABLE TO PROVIDE ANY COGENT EXPLANATION REGARDING THE WHEREABOUTS OF THESE PAYEES. THE LD. DR ALSO FURNISHED A WRITTEN NOTE IN SUPPORT OF THE ORDER OF THE LOWER AUTHORITIES, WHER EIN HE POINTED OUT THAT SOME OF THE PAYEES HAD BEEN STRUCK OFF BY THE REGISTRAR OF COMPANIES A ND WERE NO LONGER IN EXISTENCE, WHICH PROVED THE NON-GENUINENESS OF THE PAYMENTS MADE BY THE ASSESSEE. HE ALSO DREW OUR ATTENTION TO THE FACT THAT ALTHOUGH THE TAX INVOICE S WERE RECOGNIZED AND BOOKED BY THE ASSESSEE DURING THE RELEVANT YEAR BUT THE PAYMENTS WERE ACTUALLY MADE AFTER AN UNUSUALLY TIME GAP OF ONE YEAR WHICH FURTHER RAISED SERIOUS D OUBTS OVER THE GENUINENESS OF THE PAYMENTS. THE LD. DR THUS SUBMITTED THAT THE ORDERS OF THE LOWER AUTHORITIES BE UPHELD. 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL PLACED ON THE RECORD. WE NOTE THAT THE ASS ESSEE IS ENGAGED IN THE BUSINESS OF SALE AND SERVICING OF IMPORTED TELECOMMUNICATION EQUIPME NTS. ADDITIONALLY THE ASSESSEE IS ALSO ACTING AS COMMISSION AGENT FOR FOREIGN PRINCIPALS. TELECOMMUNICATIONS BEING A TECHNICALLY COMPLEX AND CHALLENGING SEGMENT, THE ASSESSEE MAINT AINS A DEDICATED SERVICE INFRASTRUCTURE TO MARKET ITS PRODUCTS AND ALSO PROVIDE MAINTENANCE SERVICES TO THE CUSTOMERS. APART FROM ITS OWN MARKETING & SERVICING TEAM, THE ASSESSEE CO MPANY HAS ALSO APPOINTED EXTERNAL MARKETING CONSULTANTS TO AGGRESSIVELY PURSUE ORDERS , TENDER PROCESSES, CONDUCT NEGOTIATIONS AND ENSURE DELIVERY OF PRODUCTS AS WELL AS COLLECTI ON FROM CUSTOMERS. THE ASSESSEE HAS ALSO ENGAGED COMPANIES WHO PROVIDE ANNUAL MAINTENANCE SE RVICES FOR ALL SERVICE MAINTENANCE 6 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 CONTRACTS OF THE ASSESSEE. FROM PERUSAL OF THE MATE RIAL PLACED ON RECORD, IT IS NOTED THAT THE ASSESSEE COMPANY CATERS TO REPUTED TELECOM COMPANIE S WHICH COMPRISES OF BOTH PRIVATE TELECOM COMPANIES SUCH AS TATA TELESERVICES, RELIAN CE ETC. AND GOVERNMENT ENTITIES SUCH AS BSNL & MTNL. ACCORDINGLY THE ASSESSEE ARRANGES AND PROCURES TELECOMMUNICATION EQUIPMENTS REQUIRED BY THESE CUSTOMERS AND THEREAFT ER SUPPLIES TO THEM. IN ORDER TO PROCURE ORDERS FROM THE CUSTOMERS NAMED IN THE FOREGOING, I T IS UNDENIABLE THAT THE ASSESSEE WOULD BE REQUIRED TO UNDERTAKE SUBSTANTIAL MARKETING EFFO RTS TO BE ABLE TO SOLICIT ORDERS FOR THEIR TELECOM EQUIPMENT REQUIREMENTS ACROSS INDIA. FURTH ER, THE VERY TECHNICAL NATURE OF THESE PRODUCTS AS WELL AS THE FACT THAT MOST OF THESE EQU IPMENTS ARE IMPORTED FROM ABROAD, WOULD NECESSITATE PROFESSIONAL SERVICING & MAINTENANCE; W HICH IS ALSO PROVIDED BY THE ASSESSEE. CONSIDERING THE NATURE AND MODUS OPERANDI OF THE BU SINESS OF THE ASSESSEE, THE PROFILE OF THE CUSTOMERS AND THE QUANTITY AND VALUE OF THE PRODUCT S SUPPLIED BY THE ASSESSEE TO THEM, THE ROLE OF EXTERNAL MARKETING AGENTS AND MAINTENANCE S ERVICE PROVIDERS IN THEIR LINE OF BUSINESS CANNOT BE DENIED. THE FACTS ON RECORD CLEARLY SHOW THAT THE ASSESSEE HAD INDEED SUPPLIED IMPORTED EQUIPMENTS TO ITS CUSTOMERS AND ALSO EXECU TED SERVICE MAINTENANCE CONTRACTS ENTERED INTO WITH THEM. IN THESE CIRCUMSTANCES WE C ANNOT BY PERSUADED TO HOLD THAT IN THIS ENTIRE VALUE CHAIN, THE ASSESSEE WAS NOT REQUIRED T O PUT IN ANY EFFORTS OR FOR THAT MATTER NEED NOT HAVE ENGAGED THIRD PARTIES TO ASSIST IN PROCURI NG ORDERS AS WELL AS TO PROVIDE ANNUAL MAINTENANCE SERVICES. 10. WE FIND THAT FOR MARKETING THE TELECOMMUNICATIO N EQUIPMENTS THE ASSESSEE HAD ENGAGED THE SERVICES OF SERVICES OF TWO AGENTS VIZ. M/S. BHUMI FINANCIAL CONSULTANTS PVT LTD & M/S PASSIONATE AGENCIES PVT LTD. WE NOTE THAT THE PAYMENTS WERE MADE TO THEM BY ACCOUNT PAYEE CHEQUES AND TDS WAS DEDUCTED AT THE R ATES SPECIFIED IN THE LOWER WITHHOLDING TAX CERTIFICATES PROVIDED BY THE DEPART MENT. WE NOTE THAT THE SALE PRICE OF THE TELECOMMUNICATION EQUIPMENTS SOLD THROUGH THEM WAS ALSO RECEIVED THROUGH ACCOUNT PAYEE CHEQUES AND IT IS ONLY WHEN THE AGENTS WERE ABLE TO REALIZE THE PAYMENTS FROM THE CUSTOMERS THAT AS PER THE TERMS AGREED, THE ASSESSEE REMITED THEIR COMMISSION ON SUCH SALES. THE TERMS & CONDITIONS OF THE AGREEMENT ENTERED INTO WITH M/S PASSIONATE AGENCIES PVT. LTD. IS AS FOLLOWS: 7 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 1. TSHPL IS SELLING THEIR GOODS IN INDIA. PRIMARILY IN THE EQUIPMENT OF ALL OR MOST OF THE GOODS SUCH AS USE FOR MEASURING CHECKING AN D TESTING INSTRUMENT/INSTRUMENTS AND SOME PARTS OF OPTICAL FIBRE COMMUNICATION ETC. 2. TSHPL TAKES THE HELP OF OTHER INDIAN COMPANIES/FIRM S FOR PROCUREMENT OF PURCHASE ORDERS, IN CONNECTION TO THE SALE OF GOODS IN INDIAN MARKET. 3. PAL HAS SUFFICIENT INFLUENCE ON AND CONNECTION WITH THE INDIAN BUYERS PRIVATE AND GOVERNMENT SECTORS, PRIMARILY IN THE REQUIREMEN T OF AN OR MOST OF THE GOODS USE FOR MEASURING CHECKING AND TESTING INSTRUMENT/INSTRUMEN TS AND SPARE PARTS OF OPTICAL FIBRE TELECOMMUNICATION ETC. 4. TSHPL IS IN THE REQUIREMENT TO SECURE BULK ORDER(S) FOR THE SUPPLY OF GOODS IN INDIAN AND IS IN PAL POSITION AND WILLING TO PROCUR E THE ORDER(S) FOR TSHPL. 5. TSHPL HAS AGREED TO TAKE THE SERVICES OF PAL FOR TH E PROCUREMENT OF PURCHASE ORDER FOR THE SUPPLY OF GOODS, SUBJECT TO THE TERMS AND CONDITIONS AS ENUMERATED HEREIN BELOW: NOW IT IS MUTUALLY AGREED BETWEEN THE PARTIES: 1, THIS AGREEMENT SHALL TAKE EFFECT FROM THE 1ST AP RIL, 2010 AND SHALL REMAIN IN FORCE FOR THE NEXT ONE YEAR THAT IS TILL 31ST MARCH, 2011, 2. ALL PURCHASE ORDER(S) PROCURED BY THE PAL WILL B E FORWARDED TO TSHPL AND WILL NOT BE BINDING UNTIL ACCEPTANCE IS COMMUNICATED BY TSHP L TO THE PAL, TSHPL HAS THE RIGHT, IN ITS SOLE DISCRETION, TO ACCEPT OR REJECT ALL OR ANY OF TILT' PURCHASE ORDERS PROCURED AND FORWARDED BY THE PAL, NO COMMISSIONS ARE PAYABLE ON ANY PURCHASE ORDER NOT ACCEPTED AND EXECUTED BY TSHPL. 3. IT IS AGREED AND UNDERSTOOD BETWEEN BOTH THE PAR TIES THAT THIS IS NOT AN EXCLUSIVE CONTRACT. EITHER OF THE PARTY TO THIS AGREEMENT IS FREE TO GIVE SERVICES TO OR TAKE SERVICES FROM ANY OTHER PARTY. 4. IN CONSIDERATION OF SERVICES RENDERED BY PAL, TH E TSHPL WILL PAY THE FIXED RATE COMMISSION ON THE ITEMS OF INSTRUMENT AND SPARE PAR TS. PURCHASE ORDER OF THE GOODS, AS PER ANNEXURE-A PROCURED BY PAL. THE CLAIM OF PAL WI LL AROSE ONLY OF THE ITEMS ACTUALLY SUPPLIED BY TSHPL. 5. EXCEPT AS PROVIDED IN THIS AGREEMENT PAL, IS AN D AT ALL TIMES WILL BE AN INDEPENDENT BODY. NOTHING CONTAINED IN THIS AGREEMENT IS TO BE CONSTRUCTED AS CONSTITUTING THE PAL AS A PARTNER OR EMPLOYEE OR AGENT OF TSHPL OR FORE IGN COMPANY OR AUTHORIZING THE PAL TO CREATE AND ASSUME ANY OBLIGATION OR LIABILITY IN THE NAME OF TSHPL. 6. ANY OF THE PARTIES MAY TERMINATE THIS AGREEMENT BY SERVING A NOTICE OF THREE MONTHS TO THE OTHER PARTY. THE ACCOUNTS BETWEEN THE PARTIES W ILL BE SETTLED AND ADJUSTED FINALLY WITHIN THE AFORESAID PERIOD OF THREE MONTHS. 7. PAL WILL NOT BE HELD LIABLE FOR ANY CLAIMS ARISI NG DUE TO SHORTAGES, INFERIOR QUALITY ETC FOR GOODS SUPPLIED BY THE TSHPL. 8. IN CASE OF ANY DISPUTE BETWEEN THE PARTIES OUT O F OR IN CONNECTION WITH THE AGREEMENT, THE SAME SHALL BE REFERRED TO SOLE ARBIT RATOR, WHO MAY BE APPOINTED BY THE PARTIES BY MUTUAL AGREEMENT. THE PROCEEDING HELD BY THE ARBITRATOR IN MAKING THE AWARD WILL BE IN ACCORDANCE WITH THE PROVISIONS OF LNDIA ARBITRATION AND CONCILIATION ACT, 1996 8 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 OR ANY STATUTORY MODIFICATION THEREOF. THE AWARD OF ARBITRATOR SHALL BE FINAL AND BINDING ON THE PARTIES. / IN WITNESS WHEREOF THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT. PASSIONATE AGENCIES PVT. LTD FOR TIRUMALA SEVEN H ILLS(P) LTD SD/- SD/- 11. THEREAFTER, THE ASSESSEE COMPANY HAS MADE SOME ADDITIONAL TASKS ALSO WITH THE PASSIONATE AGENCIES PVT. LTD. THE TERMS AND CONDITI ONS ARE AS UNDER: THIS IS TO INFORM YOU THAT AS PER AGREEMENT YOU WER E APPOINTED AS SELLING AGENTS IN INDIAN MARKETS FOR OUR FOREIGN PRINCIPALS. HOWEVER THERE ARE CERTAIN TERMS AND CONDITIONS THAT ARE REQUIRED TO BE ADDED BEFORE COM MENCEMENT OF ANY TRANSACTION BETWEEN US THOUGH SOME OF THEM WERE ALREADY MENTION ED IN THE CORRESPONDENCE DATE 01- 04-2010. THE TERMS & CONDITIONS ARE AS FOLLOWS: 1) PAL WILL BE USING OUR TRADE NAME AND REPRESENTIN G OUR COMPANY NAME WHILE PERFORMING THE SERVICE ON BEHALF OF US. PAL WILL NO T ONLY MARKET OUR PRODUCTS BUT ALSO MARKET OUR BRAND. WHILE PERFORMING SERVICE ON BEHAL F OF US PAL WILL NOT USE ITS OWN COMPANY NAME AT ANY POINT OF TIME. 2) PAL WILL BE RESPONSIBLE FOR PROCURING THE PURCHA SE ORDERS EITHER THROUGH TENDERS PUBLISHED ALL OVER INDIA OR THROUGH DIRECT MARKETIN G AND WILL INFORM US ABOUT THE VARIOUS TENDERS WITH RESPECT TO DEMAND OF THE PRODUCTS OF O UR FOREIGN PRINCIPALS. 3) PAL WILL COLLECT TENDER DOCUMENTS ON OUR BEHALF AND SEND TO US. 4) PAL WILL GIVE US FULL DETAILS LIKE RATE QUOTED B Y VARIOUS VENDORS TO THEM AND NAME OF THE BIDDERS. 5) PAL NOT ONLY ENGAGE FOR PROCURING THE PURCHASE O RDER FOR SUPPLY OF GOODS, BUT ALSO WILL BE RESPONSIBLE FOR ANY CLARIFICATION IF ANY RE QUIRED IN REGARD TO ORDERS PROCURED AND SEND THE SAME TO US TO FORWARD THE SAME TO OUR FORE IGN PRINCIPAL. 6) PAL WILL BE RESPONSIBLE FOR GETTING CONFIRMATION OF THE MATERIAL DELIVERED & PROPERLY INSTALLED WITH THE PARTIES. 7) PAL WILL BE RESPONSIBLE FOR PROPER COMMUNICATION WITH US WITH RESPECT TO ANY ISSUE WITH REGARD TO THE DELIVERY OR INSTALLATION OF GOOD S & PERFORMANCE OF ANY SERVICE. 8) AFTER EXECUTION OF ORDER WE WILL SEND INVOICE TO PARTIES WITH A COPY TO YOU FOR FOLLOW UP. 9) PAL WILL FURTHER RESPONSIBLE FOR FOLLOW UP WITH THE PARTIES. PAL WILL BE CHASING INDIAN TELECOMMUNICATION PLAYER TO MAKE PAYMENT IN ENTIRET Y TO OUR FOREIGN PRINCIPAL'S. 10) PAL WILL BE RESPONSIBLE FOR GIVING US THE FEEDB ACK OF SUPPLIED TELECOM EQUIPMENT ALL OVER THE INDIA 9 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 11) PAL IS REQUIRED TO GIVE US ALL THE DOCUMENTS AN D CORRESPONDENCE WHICH ARE REQUIRED TO DELIVER TO FOREIGN PRINCIPALS. 12) FINALLY YOU ARE ALSO RESPONSIBLE TO COLLECT FOR M C (I.E. CONCESSIONAL RATE OF TAX ON CST SALES) FROM THE PARTY AND ALSO MAKING US AVAILA BLE THE SAME. WE MAKE IT CLEAR TO YOU THAT THIS AFORESAID JOB WHI CH WERE NOT MENTIONED IN AGREEMENT IS PART AND PARCEL OF SAME JOB. THE EARLIER AGREED REM UNERATION WILL REMAIN SAME AS THIS IS NOT ADDITIONAL EXTRAJOB. WE ARE PLEASED TO APPOINT YOU AS OUR LIAISON WORK P ARTNER. YOUR SCOPE OF WORK IS AS FOLLOWS: A. YOU WILL BE RESPONSIBLE FOR TAKING THE FEEDBACK OF REQUIREMENT OF TELECOM EQUIPMENT IN ALL OVER INDIA. B. FROM TIME TO TIME YOU WILL GIVE US FEEDBACK OF T ENDERS FLOATED BY THE PARTY. IF POSSIBLE, EVEN REQUIREMENTS OF EVEN SMALL PARTIES WILL BE FOR WARDED TO YOU. C. YOU WILL NOT INVOLVE WHERE PARTIES ARE INTERESTE D IN DIRECT IMPORT OF TELECOM EQUIPMENT AS WE HAVE APPOINTED SOME OTHER PARTY. D. YOU WILL COLLECT TENDER DOCUMENTS ON OUR BEHALF AND SEND TO US. E. IF ANY CLARIFICATION IS NEEDED IN TENDERS, YOU H AVE TO GET FEEDBACK AND SEND IT TO US. F. WE WILL TRY TO SEND TENDERS DIRECTLY TO PARTIES IN CASE IT IS NOT POSSIBLE WE WILL SEND IT TO YOU FOR ONWARD SUBMISSION. G. AT THE TIME OF OPENING YOU WILL REPRESENT ON OUR BEHALF AND YOU WILL GIVE US FULL DETAILS LIKE RATE QUOTED BY VARIOUS PARTIES AND NAME OF THE BIDDERS. H. AFTER EXECUTING THE ORDER WE WILL INVOICE TO PAR TIES WITH A COPY TO YOU FOR FOLLOW UP. I. YOU WILL FOLLOW UP THE PAYMENT AND 'C FORMS. AS WE HAVE AGREED AND DECIDED MUTUALLY, WE WILL PAY YOU OUT AFTER COMPLETING THE FULL TRANSACTION. 12. SIMILAR TERMS & CONDITIONS WERE AGREED WITH BHU MI FINANCIAL CONSULTANTS PVT LTD. THESE FACTS HAVING NOT BEEN DISPUTED BY THE L OWER AUTHORITIES, WE NOTE THAT THE ROLE OF AGENTS FOR SALE AND PURCHASE OF GOODS CANNOT BE IGNORED AND FOR THE SERVICES RENDERED THEY ARE ENTITLED TO BE COMPENSATED AS PER AGREEMEN T. WE ARE THEREFORE UNABLE TO AGREE WITH THE AOS ASSUMPTION THAT COMMISSION COULD NOT HAVE BEEN PAID BY THE ASSESSEE FOR SELLING THE TELECOMMUNICATION EQUIPMENTS. 10 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 13. WE FURTHER NOTE THAT THE ASSESSEE HAD ENTERED I NTO ANNUAL MAINTENANCE CONTRACTS WITH ITS CUSTOMERS. FOLLOWING ARE THE MAJOR SERVICES PRO VIDED BY TSHPL:- A. ANNUAL MAINTENANCE OF TELECOM EQUIPMENT. B. ANNUAL MAINTENANCE OF AIR CONDITIONING EQUIPMENT . C. TECHNICAL LIFE ANALYSIS OF THE EQUIPMENT D. ASSESSMENT OF HEAT LOAD FACTOR E. GAS CHARGING 14. THE ASSESSEE THEREFORE ACTED AS THEIR SERVICE P ARTNERS AND PROVIDED MAINTENANCE SERVICES TO ENSURE THAT THE EQUIPMENTS SUPPLIED BY THEM PERFORMED WELL AND UPTO THE SPECIFICATIONS REQUIRED BY THE CUSTOMERS. FROM THE FACTS ON RECORD IT IS EVIDENT THAT THE ASSESSEE HAD GENERATED SUBSTANTIAL REVENUES IN THE FORM OF ANNUAL MAINTENANCE SERVICE FEES FROM THE CUSTOMERS. FOR INSTANCE, THE ANNUAL MAINTE NANCE FEES FROM BSNL ITSELF WAS IN EXCESS OF RS.100 LACS FOR THE YEAR. CONSIDERING THE NATURE OF ASSESSEES BUSINESS AND THE PROFILE OF THE CUSTOMERS, THE ASSESSEE WAS REQUIRED TO PROVIDE THE SERVICING SOLUTIONS AT VARIOUS PLACES AND PREMISES OF THE CUSTOMERS WHICH WERE LOCATED ACROSS INDIA. WE THEREFORE APPRECIATE THE ASSESSEES CONTENTION THAT THEIR IN- HOUSE SERVICE TEAM COULD NOT HAVE BEEN SUFFICIENT TO MEET THE SERVICING NEEDS OF THE CLIEN TS AND THAT THEY HAD SUB-CONTRACTED SOME OF THEIR ANNUAL MAINTENANCE CONTRACTS TO EXTERNAL SERV ICE PROVIDERS TO EXECUTE THE ANNUAL MAINTENANCE CONTRACTS AT ECONOMICAL RATES. WE NOTE THAT THE ASSESSEE HAD APPOINTED THREE SERVICE PROVIDERS, M/SBHUMI FINANCIAL CONSULTANTS P VT LTD, M/S GREENVIEW PROJECTS PVT LTD & M/S INTIMATE CONSTRUCTION PVT LTD. FOR PROVID ING SERVICING SOLUTIONS TO THEIR CLIENTS. THE ASSESSEE HAD ENTERED INTO AGREEMENTS WITH EACH OF THESE ENTITIES HAVING SIMILAR TERMS & CONDITIONS. THE EXTRACTS OF ONE OF THE TERMS & COND ITIONS OF THE APPOINTMENT LETTER WITH M/S. GREENVIEW PROJECTS PVT LTD ENTERED INTO ON 13.07.20 10 IS REPRODUCED BELOW: TO DATED: 13/07/2010 GREENVIEW PROJECTS PVT. LTD. ARRAH, BIDHAN PARK, BIDHAN NAGAR WEST BENGAL-713212 DEAR SIR, RE: APPOINTMENT FOR ASSESSMENT OF HEAD LOAD FACTOR. WE HAVE RECEIVED ORDER FROM RELIANCE INFRATEL LTD. MAHARASTRA FOR ASSESSMENT OF HEAD LOAD FACTOR OF AIR-CONDITIONERS INSTALLED A T EACH SITE. 11 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 AS DISCUSSED WITH YOU AND RELYING ON YOUR INFRASTRU CTURE AVAILABILITY, WE HEREBY APPOINT YOU FOR THE SAME JOB. YOUR JOB WILL BE AS FOLLOWS:- A. CHECK EACH AND EVERY PAC AND GIVE US YOUR REPORT WHO TO MINIMIZE HEAD OF THE PAC. B. IF YOU THINK THAT PAC IS OLD AND NOT IN A POSITI ON TO REDUCE THE HEAD BY ANY CHANGES THAN YOUR REPORT SHOULD BE FOR REPLACEMENT. C. ANY OTHER MAJOR CHANGES REQUIRED TO BE MADE. D. IF YOU THINK THAT PAC IS OK BUT SOME PARTS OF PA C CAN BE REPLACE AND IT WILL WORK AS PER OUR REQUIREMENT. E. YOU WILL GIVE US REPORT FOR EACH PAC ALONG WITH SITE DETAILS. F. JOB MUST BE COMPLETED BY END OF OCTOBER 2010. THE WHOLE IDEA OF DOING THIS EXERCISE IS TO REDUCE THE COST OF RECURRING MAINTENANCE AND ALSO AT THE SAME TIME TO ENSURE THE PAC MUST WORK SMOOTHLY SO THAT BREAK DOWN OF PAC WILL BE MINIMIZED. FOR THIS YOU WILL GET REMUNERATION OF RS.12101-(RUP EES ONE THOUSAND TWO HUNDRED TEN ONLY.) PER SITE PLUS SERVICE TAX AND TD S DEDUCTIBLE AS APPLICABLE. DETAILS OF THE SITE ALONG WITH PAC WILL BE GIVEN TO YOU SEPARATELY. FURTHER, THIS IS FOR YOUR INFORMATION AND IT IS BEI NG THE PART OF THE TERMS AND CONDITIONS THAT YOU WILL USE OUR TRADE NAME AND REP RESENT OUR COMPANY NAME AS PRINCIPAL WHILE PERFORMING THE SERVICE ON BEHALF OF US. YOU WILL NOT USE THE IDENTITY OF YOUR COMPANY AT ANY POINT OF TIME. FOR THIS WE WILL ISSUE AN AUTHORIZATION LETTER FOR REPRESENTING OUR COMPANY A S PRINCIPAL. WE WILL MONITOR YOUR WORTH FROM TIME TO TIME AND OU R MEN WILL GO AND VISIT THE SITE AND CHECK THE RECOMMENDATION GIVEN BY YOU. BAS ED ON YOUR RECOMMENDATION WE WILL FORWARD THE REPORT TO RELIAN CE INFRATEL LTD. IF WE FIND THERE IS ANY LAPSE ON YOUR PART WE WILL BE COMPELLED TO DEDUCT TWICE OF THE AMOUNT GIVEN TO YOU PER PAC. 15. FROM THE ABOVE TERMS AND CONDITIONS OF THE AGR EEMENT, THE NATURE OF SERVICES BEING PROVIDED BY THE SERVICE PROVIDERS IS ABUNDANTLY CLE AR. THE FACT THAT THE SERVICES WERE INDEED PROVIDED IS EVIDENT FROM THE FACT THAT THE ASSESSEE WAS ABLE TO GENERATE CORRESPONDING REVENUES IN THE FORM OF ANNUAL MAINTENANCE SERVICE FEES FROM THEIR CUSTOMERS. WE NOTE THAT 12 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 BEFORE THE LOWER AUTHORITIES THE ASSESSEE HAD SUFFI CIENTLY DEMONSTRATED THE LINKAGE BETWEEN THE REVENUES EARNED AND THE PAYMENTS MADE TO THE SE RVICE PROVIDERS. ON THESE FACTS AND CIRCUMSTANCES, WE FIND THAT EVEN IN RESPECT OF THE PAYMENTS MADE TO THE SERVICE PROVIDERS, THE ASSESSEE HAD DULY SUBSTANTIATED THE COMMERCIAL AS WELL AS BUSINESS EXPEDIENCY OF SUCH EXPENSES BEFORE THE LOWER AUTHORITIES. WE THUS AGRE E WITH THE LD. AR OF THE ASSESSEE THAT WHEN THE REVENUES DERIVED IN THE FORM OF INCOME FRO M SALE OF TELECOMMUNICATION EQUIPMENTS AND ANNUAL MAINTENANCE FEES WERE ACCEPTE D AND NOT DISPUTED BY THE REVENUE THEN IT WAS UNJUSTIFIED ON THEIR PART TO DISBELIEVE THE CORRESPONDING EXPENSES INCURRED TO DERIVE SUCH INCOME. 16. FROM THE ABOVE FACTS WE HOLD THAT WHEN THE ENTI RE SEQUENCE OF TRANSACTIONS STARTING FROM IMPORTING OF TELECOMMUNICATION EQUIPMENT, SOLI CITING OF ORDERS, TENDERING PROCESS, DELIVERING PRODUCTS, AFTER SALES SUPPORT PROVIDED T O CUSTOMERS, ANNUAL MAINTENANCE SERVICES PROVIDED TO THE CUSTOMERS, REALIZATION OF PAYMENTS ETC. HAS NOT BEEN DISPUTED NOR DISBELIEVED BY THE LOWER AUTHORITIES, THEN THEY COU LD NOT DISBELIEVE OR DOUBT THE GENUINENESS OF THE COMMISSION AND SERVICE FEES PAID TO THE AGEN TS & SERVICE PROVIDERS RESPECTIVELY AND TREAT IT AS BOGUS EXPENSES ONLY BECAUSE THE NOTICES ISSUED TO THE PAYEES WENT UN-SERVED. 17. WE NOTE THAT THE ASSESSEE HAD DISCHARGED THE ON US CAST BY LAW IN PROVING IDENTITY AND CREDITWORTHINESS OF THE PAYEES AS WELL AS THE GENUI NENESS OF THE AGREEMENTS ENTERED INTO WITH THEM. THE LD. AR OF THE ASSESSEE HAS PLACED AL L THE RELEVANT DETAILS & DOCUMENTS, WHICH THE ASSESSEE WAS REQUIRED TO MAINTAIN IN THE ORDINARY COURSE OF ITS BUSINESS. LIKE ANY OTHER ITEM OF EXPENSE, THE RELEVANT DETAILS SUCH AS COPIES OF THE AGREEMENTS, TAX INVOICES, SERVICE TAX REGISTRATION CERTIFICATES, CONFIRMATION OF ACCOUNTS, DETAILS OF PAYMENTS, DETAILS OF TAX DEDUCTED ALONG WITH THE LOWER WITHHOLDING TAX C ERTIFICATES PROVIDED BY THE PAYEES ETC. WERE FURNISHED BEFORE THE LOWER AUTHORITIES, WHICH SUFFICIENTLY PROVED THE GENUINENESS OF THE PAYMENTS MADE. IT IS FURTHER NOTED THAT THE ASS ESSEE HAD ALSO DEMONSTRATED THE LINKAGE BETWEEN THE REVENUES EARNED FROM THE CUSTOMERS AND THE COMMISSION PAID TO THE AGENTS AS WELL AS SERVICE FEES PAID TO ANNUAL MAINTENANCE SER VICE PROVIDERS. THE EXTRACTS OF BANK STATEMENT OF THE ASSESSEE AND THE CONFIRMATION FURN ISHED BY THE PAYEESARE ALSO AVAILABLE ON RECORD. FURTHERMORE, WE NOTE THAT THE PARTIES TO WH OM THE PAYMENTS WERE MADE WERE NOT ASSOCIATES OR RELATED ENTERPRISES OF THE ASSESSEE. NOTHING HAS BEEN BROUGHT ON RECORD THAT THE 13 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 PAYMENTS MADE BY THE ASSESSEE HAD COME BACK TO IT. IN THE CIRCUMSTANCES EVEN THE CREDITWORTHINESS OF THE CUSTOMER AND THE GENUINENES S OF THE TRANSACTION WAS DULY ESTABLISHED BY THE APPELLANT. 18. FROM THE DOCUMENTS ON RECORD WE FIND THAT THE C OMMISSION WAS PAID TO FOR PROCURING SALES ORDERS AND THE SERVICE FEES WAS PAID TOWARDS THE ANNUAL MAINTENANCE CONTRACTS OBTAINED FROM TELECOM COMPANIES SUB-CONTRACTED TO T HE PAYEES. WE NOTE THAT THE COPIES OF INVOICES PROVIDE THE COMPLETE DETAILS OF ORDERS FOR WHICH THE PAYMENTS WERE MADE. THE PAYEES HAD ALSO SET OUT ITS PAN & STRN IN THE INVOI CES, WHICH WAS DULY SIGNED & STAMPED. THE SERVICE TAX REGISTRATION CERTIFICATE OF M/S BHU MI CONSULTANTSPVT LTD ESTABLISHED THAT THEY WERE IN THE BUSINESS OF PROVIDING BUSINESS AUX ILLARY SERVICES, AND THEREFORE IT HAD CHARGED SERVICE TAX @ 12.36% ON THE COMMISSION AS W ELL AS SERVICE FEES BILLED TO THE ASSESSEE. WE NOTE THAT SIMILAR INFORMATION ABOUT TH E NATURE OF BUSINESS IS ALSO DISCERNIBLE FROM THE SERVICE TAX REGISTRATION CERTIFICATES OF O THER PAYEES WHICH CORRESPONDED WITH THE SERVICES RENDERED BY THEM TO THE ASSESSEE. THE SERV ICE TAX LIABILITY CHARGED BY THE PAYEES WAS ALSO DULY PAID & DISCHARGED BY THE ASSESSEE. WE FURTHER FIND THAT THE ASSESSEE HAS FURNISHED ITS RELEVANT BANK STATEMENTS WHICH SUBSTA NTIATE THE ACTUAL PAYMENT OF COMMISSION& SERVICE FEES WAS RECEIVED BY THE PAYEES THROUGH NORMAL BANKING CHANNEL. 19. WE PARTICULARLY NOTE THAT THE ASSESSEE DEDUCTED & DEPOSITED TDS IN ACCORDANCE WITH WITHHOLDING TAX CERTIFICATES PROVIDED TO THE PAYEES U/S 197 OF THE ACT BY ITO (TDS) AT KOLKATA. THE CORRECTNESS AND/OR GENUINENESS OF THE CERTIFICATES ISSUED BY THE DEPARTMENT U/S 197 OF THE ACT HAS NOT BEEN DENIED OR DISPUTED BY A NY OF THE LOWER AUTHORITIES. WE UNDERSTAND THAT THE PAYEES HAD MADE THE APPLICATION S U/S 197 OF THE ACT.IT IS AFTER DUE EXAMINATION OF THEIR ACCOUNTS, ESTIMATE OF INCOME, PAST HISTORY ETC. THAT THE LOWER WITHHOLDING TAX CERTIFICATES WERE ISSUED BY THE TDS DEPARTMENT. THIS CERTIFICATE IS THEREFORE AN IMPORTANT PIECE OF EVIDENCE, WHICH CLEARLY SUBST ANTIATED THE IDENTITY, AND CREDITWORTHINESS OF THE PAYEES. THE COPY OF THE CE RTIFICATE ISSUED BY THE DEPARTMENT U/S 197 OF THE ACT TO PASSIONATE AGENCIES PVT. LTD. IS AS U NDER: OFFICE OF THE INCOME TAX OFFICER (TDS), WARD 59(3), KOLKATA 10B, MIDDLETON ROW ( 8 TH FLOOR), KOLKATA- NO. WD 59(3)/197(1)/10-11/32 DATED 06.05.2010 CERTIFICATE UNDER SECTION 197(1) OF THE LT .ACT, 19 61 14 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 (READ WITH' SECTION 28AA OF THE INCOME TAX RULES,19 62) NAME AND ADDRESS OF THE ASSESSEE: PASSIONATE AGEN CIES PVT. LTD. 1 H, MADAN MOHAN BURMAN STREET KOLKATA - 700 007 PAN AAFCP4215Q FINANCIAL YEAR 2010-11 ASSESSING OFFICER'S CIRCLE / WARD NEW CASE IN PURSUANCE OF SECTION 194C' (PAYMENT MADE ON ACCO UNT OF CONTURCT/ SUB CONTRUCT). SECTION 194-H (PAYMENT MADE ON ACCOUNT OF COMMISSIO N/BROKERAGE) AND SECTION 194J (PAYMENT MADE ON ACCOUNT FOR MAKING PAYMENTS TOWAR DS PROF (TECH.SERVICES), THE UNDERSIGNED HEREBY AUTHORISE THE PRINCIPAL OFFICERS OF THE PARTIES. RESPONSIBLE FOR MAKING PAYMENT'S TOWARDS CONTRACT, COMMISSION/BROKERAGE' A ND TECHNICAL SERVICES, RESPECTIVELY. TO MAKE PAYMENT AFTER DEDUCTING OF T.O.S. @0 01% ( AT THE RATE OR ZERO POINT ZERO ONE PER CENT) AT THE TIME OF PAYMENT OF CREDIT THEREOF.' THE CERTIFICATE SHALL REMAIN VALID UPTO 31.03.2011F ROM THE DATE OF ISSUE UNTIL IT IS CANCELLED OR WITHDRAWN BY THE UNDERSIGNED WITH INTI MATION TO THE DEDUCTEE ASSESSEE. SD/- (SOVAN BANDYOPADHYAY INCOME TAX OFFICER(TDS) WARD-59(3) KOLKATA 20. THE ASSESSEE ACTED ON THE CERTIFICATES PROVIDED BY THE PAYEES AND ACCORDINGLY DEDUCTED TAX AT THE LOWER RATES AS SPECIFIED THEREI N. ON QUERY FROM THE BENCH, WE WERE INFORMED THAT THE TDS RETURNS WERE PROCESSED U/S 20 0A AND THE TDS WING HAS NOT DRAWN ANY ADVERSE INFERENCE AGAINST THE ASSESSEE. ACCORDI NGLY THE GENUINENESS AND CORRECTNESS OF THE WITHHOLDING TAX CERTIFICATES ARE NOT IN DOUBT. THESE FACTS, IN OUR VIEW, ESTABLISH THAT THE PAYEESWERE REGULAR INCOME-TAX ASSESSEE ENGAGED IN B USINESS AND THEIR IDENTITY AND GENUINENESS HAS BEEN ACCEPTED IN THEIR RESPECTIVE T AX ASSESSMENTS BY THE TAX AUTHORITIES. 21. FROM THE ORDERS OF THE LOWER AUTHORITIES, IT EM ANATES THAT THE ONLY REASON FOR MAKING THE IMPUGNED ADDITION IS THAT THE NOTICES ISSUED TO THE PAYEES WENT UN-SERVED.WE ARE HOWEVER OF THE CONSIDERED VIEW THAT MERE NON-SERVIC E OF NOTICE COULD NOT LEAD TO ADVERSE CONCLUSION THAT THE EXPENDITURE WAS BOGUS OR IN-GEN UINE. THE NON-SERVICE OF NOTICE ALONE WAS NOT A SUFFICIENT AND DECISIVE FACTOR TO DISALLO W THE PAYMENTS IN THE GIVEN FACTS OF THE PRESENT CASE. IT MAY HAVE RAISED SUSPICION IN THE M IND OF THE AO BUT IT WAS NOT REASON ENOUGH TO DISALLOW THE EXPENDITURE. WE AGREE WITH T HE LD. AR OF THE ASSESSEE THAT THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE T RANSACTION CANNOT BE PROVED ONLY BY 15 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 PRODUCING THE PAYER CONCERNED FOR PERSONAL EXAMINAT ION BY THE AO. WE ALSO FIND THAT THE TDS DEPARTMENT HAD ISSUED CERTIFICATES U/S 197 OF T HE ACT TO THE PAYEES WHICH FACT ESTABLISHED THEIR IDENTITY. WE ALSO NOTE THAT THE A DDRESSES OF THE PARTIES APPEARING IN THESE CERTIFICATES CORROBORATED WITH THE ADDRESSES PROVID ED BEFORE THE LOWER AUTHORITIES. IN THE CIRCUMSTANCES IF FOR THE PURPOSE OF ISSUING CERTIFI CATES U/S 197, THE DEPARTMENT HAD ACCEPTED THE GENUINE EXISTENCE OF THESE PARTIES THEN IN THE ASSESSMENT PROCEEDINGS OF THE PAYER, THE DEPARTMENT COULD NOT DISBELIEVE THE EXISTENCE OF TH ESE PARTIES AND HOLD THE PAYEES TO BE NON-EXISTENT. AS NOTED ABOVE, THE ASSESSEE HAD PLAC ED ON RECORD SUFFICIENT EVIDENCE AND DOCUMENTS TO SUBSTANTIATE THE GENUINENESS OF EXPENS ES. IN THESE CIRCUMSTANCES, WITHOUT POINTING OUT OR ESTABLISHING ANY INFIRMITY OR FALSI TY, IT WAS NOT PROPER FOR THE LOWER AUTHORITIES TO OUT-RIGHTLY REJECT THE CLAIM FOR EXP ENSES. 22. WE FURTHER NOTE THAT THE PARTIES TO WHOM THE PA YMENTS WERE MADE WERE NOT ASSOCIATES OR RELATED ENTERPRISES OF THE ASSESSEE. UNLIKE THE RELATIONSHIP OF A COMPANY & SHAREHOLDER OR THE RELATIONSHIP OF A LENDER-BORROWE R; THE RELATIONSHIP OF A SERVICE PROVIDER- CUSTOMER IS NOT A CONTINUING ONE. THE RELATIONSHIP EXISTS ONLY TILL THE TRANSACTION IS IN PROGRESS. ONCE THE TRANSACTION IS COMPLETE THE RELA TIONSHIP COMES TO AN END. FURTHER IT IS ALSO NOT NECESSARY THAT THE AGENT OR THE SERVICE PR OVIDER HAS TO BE A KNOWN ASSOCIATE OF ANY DIRECTOR OR SHAREHOLDERS OF THE ASSESSEE-COMPANY, U NLIKE SHARE APPLICANTS IN PRIVATE PLACEMENT OR ANY LENDERS. IT IS THEREFORE NOT A CAS E WHERE AS A RESULT OF THE TRANSACTION, THERE WAS A CREATION OF CREDITOR-DEBTOR RELATIONSHIP ON L ONG TERM BASIS. THE ASSESSEE, PARTICULARLY GIVEN THE SCALE OF ITS BUSINESS, CANNOT BE EXPECTED TO KNOW AND/OR CONTINUE MAINTAINING RELATIONSHIP AND BE INFORMED ABOUT THE WHEREABOUTS OF EACH ENTITY WITH WHOM IT HAD CONDUCTED TRANSACTIONS IN EARLIER YEARS. AT THE POI NT OF TRANSACTION, THE AGENTS & SERVICE PROVIDERS RENDERED THE SERVICES, THEIR INVOICES WER E ISSUED, PAYMENTS WERE MADE AND ACCOUNT CONFIRMATIONS WERE EXCHANGED. WE AGREE WITH THE LD. ARS CONTENTION THAT APART FROM THE FOREGOING, NO OTHER ACT WAS REQUIRED TO BE PERFORMED EITHER BY THE PAYER OR THE PAYEE. IT IS PURELY A CASE OF TWO UNRELATED ENTITIE S THAT CONDUCTED A SERVICE TRANSACTION AND THE CONSIDERATIONS WERE EXCHANGED AT THE SAME TIME. WE FURTHER FIND THAT THE AO ALSO DID PRECIOUS LITTLE TO BRING ON RECORD ANY CONCLUSIVE E VIDENCE TO PROVE THAT THE PAYMENTS MADE TO THE PAYEES HAD COME BACK TO THE ASSESSEE TO SUBS TANTIATE HIS ALLEGATION THAT THE 16 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 EXPENDITURE WAS BOGUS. ON QUERY FROM THE BENCH, WE WERE FURTHER INFORMED THAT THE ASSESSEE DID NOT HAVE TRANSACTIONS WITH THESE BODIE S CORPORATE IN ANY OF THE FINANCIAL YEARS SUBSEQUENT TO THE RELEVANT FY 2010-11.ACCORDINGLY T HERE WAS NO CONTINUING RELATIONSHIP WITH THE PAYEES. FOR THE REASONS SET OUT IN THE FOR EGOING WE HOLD THAT NO ADVERSE INFERENCE BE DRAWN AGAINST MERE NON-SERVICE OF NOTICE UPON TH E PAYEES. 23. WE NOTE THAT THE AO RELIED ON THE DECISION OF T HE HON'BLE SUPREME COURT IN THE CASE OF LACHMINARAYAN MADANLAL VS CIT(86 ITR 439) TO JUS TIFY HIS ACTION OF DISALLOWING THE COMMISSION. IN THE FACTS BEFORE THE HON'BLE APEX CO URT, THE ASSESSEE FIRM MADE PAYMENT OF COMMISSION TO ANOTHER FIRM, WHICH WAS NOT AT ALL IN EXISTENCE WHEN THE COMMISSION AGREEMENT WAS ENTERED INTO. MOREOVER, IN THE PAYEE FIRM, THE MINOR CHILDREN AND SPOUSE OF THE PARTNERS OF THE PAYER FIRM ( IE ASSESSEE FIRM) WERE PARTNERS. THESE FACTS WERE DULY APPRECIATED BY THE HON'BLE APEX COURT AND THEREAFTE R THE HONBLE COURT HELD THAT THE COMMISSION AGREEMENT IS ONLY A DEVICE TO SHIFT THE PROFITS FROM THE PAYER FIRM TO PAYEE FIRM AND ACCORDINGLY UPHELD THE DISALLOWANCE OF COMMISSI ON PAYMENT. IN THE INSTANT CASE, THERE IS NO SUCH FINDING RECORDED BY THE AO IN HIS ORDER. THE REVENUE HAD NOT BROUGHT ANY MATERIAL ON RECORD TO PROVE THAT THE PAYEES WERE TH E RELATED CONCERNS OF THE PAYEES OR THAT THERE WERE NOT IN EXISTENCE. THEIR CIN DETAILS, PAN NUMBERS, SERVICE TAX REGISTRATION CERTIFICATES AND MORE PARTICULARLY THE LOWER WITHHO LDING TAX CERTIFICATES ISSUED U/S 197 BY THE INCOME-TAX DEPARTMENT ABUNDANTLY ESTABLISHED THE ID ENTITY OF THE PAYEES. HENCE THE RELIANCE ON THE DECISION OF THE APEX COURT BY THE R EVENUE IS TOTALLY MISPLACED AND IS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE BEFORE US. 24. AS FAR AS THE CONTENTION OF THE LD. DR THAT THE PAYMENTS WERE MADE AFTER UNUSUAL GAP OF ALMOST A YEAR FROM THE DATE OF INVOICES THAT RAISED SUSPICION ON THE GENUINENESS OF EXPENSES, WE FIND THAT THE ASSESSEE HAS SUFFICIENTL Y DEMONSTRATED THE LINKAGE BETWEEN THE REVENUES EARNED FROM THE TELECOM COMPANIES WITH THE PAYMENTS MADE TOWARDS COMMISSION & SERVICE FEES. WE NOTE THAT THE ASSESSEE HAD MADE THE PAYMENTS ONLY WHEN THE CUSTOMERS HAD RELEASED THEIR PAYMENTS TOWARDS THE CORRESPONDI NG SERVICES RENDERED BY THE AGENTS & THE SERVICE PROVIDERS. THE LD. AR OF THE ASSESSEE E XPLAINED THAT IT IS A WELL-KNOWN COMMERCIAL PRACTICE THAT ONLY WHEN THE PAYMENTS FOR THE ORDERS EXECUTED THROUGH THE AGENTS ARE REALIZED THAT THEIR COMMISSION IS ACTUALLY RELE ASED. SIMILARLY IN CASE OF SERVICE PROVIDERS, 17 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 IT IS ONLY WHEN THE CUSTOMER IS SATISFIED WITH THE MAINTENANCE SERVICES AND PAYS THE ANNUAL MAINTENANCE FEES THAT THE CORRESPONDING PAYMENTS AR E RELEASED TO THE SUB-CONTRACTORS. ACCORDINGLY IN THE FACTS OF THE PRESENT CASE WE NOT E THAT SINCE THE COLLECTIONS WERE REALIZED AFTER THE GAP OF TIME FROM THE CUSTOMERS THAT THE A SSESSEE ALSO CLEARED THE PAYMENTS OF THE SERVICE PROVIDERS ACCORDINGLY. WE THUS DO NOT FIND ANY INFIRMITY IN THIS ACTION OF THE ASSESSEE. 25. THE LD. DR ALSO DWELLED ON THE FACT THAT NAME O F M/S BHUMI FINANCIAL CONSULTANTS PVT LTD WAS UNDER THE PROCESS OF STRIKING OFF BY TH E REGISTRAR OF COMPANIES, WHICH SHOWED THAT THIS COMPANY WAS NOT IN EXISTENCE. ACCORDING T O HIM, THESE FEATURES ARE COMMONLY FOUND IN SHELL COMPANIES AND THEREFORE HE ARGUED TH AT ALL THE PAYMENTS MADE WERE BOGUS. IN THIS REGARD, IT IS NOTED THAT THE NAME OF M/S BHUMI FINANCIAL CONSULTANTS PVT LTD WAS UNDER THE PROCESS OF STRIKING OFF BUT HAS NOT YET BEEN ST RUCK OFF. FURTHERMORE, THE MASTER DATA OF THE COMPANIES PROVIDED BY THE LD. DR, SHOW THAT THE PROCESS OF STRIKING OFF BEGAN MUCH AFTER THE YEAR OF TRANSACTION WITH THE ASSESSEE. NO THING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THESE ENTITIES WERE NOT IN EXISTENCE DURING TH E RELEVANT FINANCIAL YEAR 2010-11. INSTEAD THE EXTRACTS FROM ROC WEBSITE FURNISHED BY THE LD. DR SHOWS THAT THE ENTITIES WERE VERY MUCH IN EXISTENCE IN THE RELEVANT FINANCIAL YEAR 20 10-11 AND HENCE THE GENUINENESS OF THE PAYMENTS MADE TO THEM COULD NOT BE DOUBTED 26. IT IS NOTED THAT IDENTICAL ISSUE CAME UP FOR CO NSIDERATION BEFORE THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF M/S. INBUILT MERCHANTS PV T. LTD. (G.A. NO. 3825 OF 2013) DATED 14.03.2014. IN THE INSTANT CASE, THE ASSESSEE HAD M ADE COMMISSION PAYMENTS TO CERTAIN NORTH EASTERN INDIAN RESIDENTS. IN THE COURSE OF AS SESSMENT THE AO HAD ISSUED NOTICES U/S 133(6) TO THE BROKERS, WHICH WERE RETURNED UNSERVED . THE AO THUS OBSERVED THAT THE ASSESSEE COULD NOT ESTABLISH THE IDENTITY OF THE BR OKERS AND ACCORDINGLY DISALLOWED THE COMMISSION PAYMENTS. ON APPEAL THE HIGH COURT HELD THAT MERE FACT THAT THE BROKER WERE NOT FOUND AT THE ADDRESS FURNISHED BY THE ASSESSEE DID NOT PROVE THE FACT THAT THE PAYMENTS WERE INGENUINE. THE COURT OBSERVED THAT IN THIS MOD ERN ERA IT MAY NOT BE POSSIBLE FOR THE ASSESSEE TO KNOW THE BROKERS PERSONALLY OR BE AWARE ABOUT THEIR WHEREABOUTS. THE HIGH COURT NOTED THAT WHATEVER ADDRESSES WAS FURNISHED T O THE ASSESSEE BY THE BROKERS, HAD BEEN DISCLOSED TO THE INCOME-TAX DEPARTMENT. THE COURT N OTED THAT THE PAYMENTS WERE ADMITTEDLY 18 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 MADE BY CHEQUE AFTER DEDUCTION OF TAX. IN THIS BACK GROUND THE COURT REJECTED THE REVENUES CASE AND HELD THAT WHEN THE PAYMENT OF COMMISSION I S PROPERLY RECORDED IN THE BOOKS MAINTAINED BY THE ASSESSEE IN THE ORDINARY COURSE O F BUSINESS, THE PAYMENTS ARE MADE BY ACCOUNT PAYEE CHEQUES AFTER DEDUCTION OF TAX, THEN SUCH COMMISSION PAYMENTS COULD NOT BE DISALLOWED. THE RELEVANT EXTRACTS OF THE JUDGMENT I S AS FOLLOWS: 'THE VIEWS EXPRESSED BY THE ASSESSING OFFICER ARE E RRONEOUS IN LAW. THE ASSESSING OFFICER HAS OVERLOOKED THE IMPORTANCE OF THE BOOKS OF ACCOUNTS MAINTAINED IN THE ORDINARY COURSE OF BUSINESS. REFERENCE IN THIS REGARD MAY BE MADE TO SUB-SECTION (2) OF SECTION 32 OF THE INDIAN EVIDENCE ACT, 1872. THE BOOKS OF ACCOUNT S MAINTAINED IN THE ORDINARY COURSE OF BUSINESS ARE RELEVANT AND THEY CANNOT BE DISCARDED IN THE ABSENCE OF APPROPRIATE REASONS. THE MERE FACT THAT RECIPIENT DID NOT REPLY IN SOME CASES OR THEY WERE NOT FOUND AT THE ADDRESS FURNISHED BY THE ASSESSEE DOES NOT IN THE L EAST PROVE THE FACT THAT THEY WERE NON EXISTENT OR THAT THE PAYMENTS SHOWN TO HAVE BEEN MA DE BY THE ASSESSEE WERE IMAGINARY. WITH THE ADVANCEMENT OF TECHNOLOGY, IT HAS BECOME POSSIB LE TO SELL GOODS THROUGHOUT THE COUNTRY THROUGH THE INTERNET. FOR THAT PURPOSE, AGENTS ARE REQUIRED THROUGHOUT THE COUNTRY. THE MECHANISM IN THAT REGARD HAS BEEN DISCLOSED BY THE ASSESSEE AND HAS BEEN RECORDED IN THE ORDER OF THE CIT (APPEALS). FOR THE PURPOSE OF CARR YING ON ITS BUSINESS, THE ASSESSEE HAS TO RECRUIT THE AGENTS. IT MAY NOT BE POSSIBLE FOR THE ASSESSEE TO KNOW THEM PERSONALLY. WHATEVER ADDRESS WAS FURNISHED TO THE ASSESSEE, HAS BEEN DIS CLOSED TO THE INCOME-TAX DEPARTMENT. PAYMENTS WERE ADMITTEDLY MADE BY CHEQUE AFTER DEDUC TION OF TAX. THE TAX DEDUCTED AS SOURCE HAS DULY BEEN DEPOSITED. THE JUDGMENT IN THE CASE OF CIT VS. PRECISION FINANCE PVT. LTD .REPORTED IN 208 ITR 465 RELIED UPON BY MR. BHOWMIC K DOES NOT REALLY ASSIST HIM. THE AFORESAID JUDGMENT IS AN AUTHORITY FOR THE PROPOSIT ION THAT MERE PAYMENT BY ACCOUNT PAYEE CHEQUE CANNOT ESTABLISH THAT THE TRANSACTION WAS GE NUINE, BUT IN THE CASE BEFORE US, BESIDES THE FACT THAT PAYMENT WAS MADE BY CHEQUE, THERE ARE OTHER PIECES OF EVIDENCE AVAILABLE WHICH ARE AS FOLLOWS: A) BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE IN THE ORDINARY COURSE OF BUSINESS; B) DEDUCTION OF TAX AT SOURCE; C) DEPOSIT OF THE MONEY DEDUCTED AT SOURCE; D) PARTICULARS OF THE RECIPIENT WERE DULY FURNIS HED; WE ARE, AS SUCH, OF THE OPINION THAT THE VIEWS EXPR ESSED BY THE LEARNED TRIBUNAL ARE UNEXCEPTIONABLE. WE, THEREFORE REFUSE TO ADMIT THE APPEAL. THE APPEAL IS THUS DISMISSED.' 27. WE FURTHER FIND THAT THE JUDGMENT OF THE HONB LE CALCUTTA HIGH COURT IN THE CASE OF MATHER & PLATT (I) LTD VS CIT (167 ITR 493) IS ALSO OF MUCH RELEVANCE IN THE FACTS OF THE PRESENT CASE. IN THE INSTANT CASE AS WELL THE ASSES SEE HAD PAID COMMISSION TO TWO AGENTS AND IN THE COURSE OF ASSESSMENT THE NOTICES ISSUED BY T HE AO U/S 131 HAD COME BACK UN-SERVED. THE AO THEREFORE DISALLOWED THE COMMISSION TREATING IT TO BE IN-GENUINE. ON APPEAL THE HONBLE CALCUTTA HIGH COURT DELETED THE IMPUGNED DI SALLOWANCE BY OBSERVING AS UNDER: 19 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 2. THE FACTS WHICH ARE MATERIAL AND THE PROCEEDING S LEADING UP TO THIS REFERENCE ARE AS FOLLOWS: MATHER & PLATT (INDIA) LTD., THE ASSESSEE, CARRIES ON THE BUSINESS OF MANUFACTURE AND SUPPLY OF, INTER ALIA, FOOD PROCESSING AND OTHER MA CHINERY. IN THE YEAR 1974, THE ASSESSEE SOLD AND SUPPLIED TO PUNJAB STATE CO-OPERATIVE SUPPLY & MARKETING FEDERATION LTD., CANNERS (INDIA) LTD. AND THE UNITED CO-OPERATIVE DISTILLERY LTD., PARITE CERTAIN MACHINERY. THE SAID TRANSACTIONS WERE EFFECTED BY THE ASSESSEE RESPECTI VELY THROUGH THREE COMMISSION AGENTS, VIZ., MINTOPCORPN. OF NEW DELHI, C.S. SINGH OF LUCKNOW AN D VANDANA SALES CORPN. OF BOMBAY. THE ASSESSEE PAID COMMISSION TO THE SAID COMMISSION AGENTS. THE MINTOPCORPN. WAS PAID RS. 1,89,980, C.B. SINGH WAS PAID RS. 20,038 AND VANDAN A SALES CORPN. WAS PAID RS. 17,832. 3. FOR THE ASSESSMENT YEAR 1975-76, THE ACCOUNTING YEAR ENDING ON 31-12-1974, THE ASSESSEE WAS ASSESSED TO INCOME-TAX. IN ITS ASSESSM ENT, THE ASSESSEE CLAIMED DEDUCTION OF THE SAID AMOUNTS PAID TO THE COMMISSION AGENTS. THE IAC WHO MADE THE ASSESSMENT EXAMINED IN DETAILS THE SAID THREE TRANSACTIONS MADE BY THE ASS ESSEE THROUGH THE COMMISSION AGENTS. SUMMONS UNDER SECTION 131 OF THE INCOME-TAX ACT, 19 61 ('THE ACT') WERE ISSUED TO EACH OF THE SAID COMMISSION AGENTS CALLING UPON THEM TO CONFIRM THE PAYMENTS OF THE SAID COMMISSION AND THE DETAILS OF THE SERVICES RENDERED BY THEM. ALL T HE SUMMONS CAME BACK WITH THE REMARK 'NOT KNOWN' FROM THE POSTAL AUTHORITIES. THE IAC THEREAF TER CALLED UPON THE ASSESSEE TO EXPLAIN THE PAYMENTS IN RESPECT OF SUCH COMMISSION WITH EVIDENC E. THE ASSESSEE SUBMITTED ITS EXPLANATION IN WRITING AND FILED THE RELEVANT CORRESPONDENCE AN D RECORDS. 4. IN RESPECT OF THE COMMISSION PAID TO MINTOPCORPN . IT WAS HELD BY THE IAC THAT THE ASSESSEE HAD ENGAGED MINTOPCORPN. WITH THE OBJECT O F EXERCISING INFLUENCE ON THE CO- OPERATIVE WHICH WAS AN UNDERTAKING OF THE PUNJAB GO VERNMENT. THE SAID CONTRACT BETWEEN THE ASSESSEE AND THE MINTOPCORPN. WAS HELD TO BE OPPOSE D TO PUBLIC POLICY AND ILLEGAL AND ON THAT GROUND THE IAC DISALLOWED THE DEDUCTION OF THE COMM ISSION PAID. 5. IN RESPECT OF COMMISSION PAID TO C.B. SINGH AND VANDANA SALES CORPN. IT WAS HELD BY THE IAC THAT AS THE ASSESSEE HAD FAILED TO TRACE THEM THE CORRESPONDENCE FILED BY THE ASSESSEE WAS NOT SUFFICIENT TO ESTABLISH THE GENUIN ENESS OF THE PAYMENTS. IT WAS NOTED THAT THE INCOME-TAX FILE NUMBERS OF THE SAID TWO AGENTS HAD NOT BEEN DISCLOSED AND, THEREFORE, THE ASSESSEE HAD FAILED TO DISCHARGE ITS PRIMARY ONUS O F ESTABLISHING THE IDENTITY OF THE AGENTS OR GENUINENESS OF THE PAYMENTS. HE DISALLOWED THE DEDU CTION OF THE AMOUNTS PAID TO THE SAID TWO AGENTS BY WAY OF COMMISSION. 6. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE COMMISSIONER (APPEALS) FROM THE ORDER OF THE IAC. THE COMMISSION ER (APPEALS) HELD THAT THE CONTRACT WITH THE MINTOPCORPN. WAS NOT VOID OR ILLEGAL AND AS SUC H THE COMMISSION PAID TO THE SAID MINTOPCORPN. WAS ALLOWABLE FOR DEDUCTION. IN RESPEC T OF THE COMMISSION PAID TO C.B. SINGH AND VANDANA SALES CORPN. THE COMMISSIONER (APPEALS) NOTED THAT THE PAYMENTS HAD BEEN MADE IN THE CASE OF THE FORMER BY A BANK DRAFT ON T HE STATE BANK OF INDIA, LUCKNOW AND IN THE CASE OF THE LATTER BY AN ACCOUNT PAYEE CHEQUE WHICH WAS ENCASHED THROUGH A BANK ACCOUNT OF THE COMMISSION AGENT. HE ALSO NOTED THAT THE ASSESS EE HAD FURNISHED THE ADDRESSES OF THE SAID TWO COMMISSION AGENTS FROM ITS RECORDS. THE CONTENT IONS OF THE ASSESSEE IN RESPECT OF THE SAID TWO COMMISSION AGENTS WERE ALSO ACCEPTED AND THE DE DUCTION AS CLAIMED BY THE ASSESSEE WAS ALLOWED. 7. BEING AGGRIEVED, THE REVENUE PREFERRED A FURTHER APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL ACCEPTED THE CASE OF THE ASSESSEE SO FAR A S THE PAYMENT OF COMMISSION TO MINTOPCORPN. WAS CONCERNED. THE TRIBUNAL HELD THAT THE ASSESSEE HAD ENTERED INTO A CONTRACT 20 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 WITH THE SAID STATE CO-OPERATIVE ON THE BASIS OF AN OPEN TENDER. IT WAS HELD THAT THE TRANSACTION WAS PURELY COMMERCIAL AND IT COULD NOT BE SAID THAT IT HAD BEEN BROUGHT ABOUT BY UNDUE INFLUENCE. THE DECISION OF THE COMMISSIONER ( APPEALS) WAS CONFIRMED. THE TRIBUNAL NOTED THAT THE IAC WAS OTHERWISE SATISFIED THAT THE MINTOPCORPN. WAS AN EXISTING ORGANISATION AND HAD PROCEEDED ON THAT BASIS. 8. IN RESPECT OF C.B. SINGH AND VANDANA SALES CORPN . THE TRIBUNAL NOTED THAT THE IAC HAD FOUND THAT THE SAID TWO COMMISSION AGENTS WERE NOT IN EXISTENCE AND THE ASSESSEE HAD NOT DISCHARGED THE BURDEN OF PROVING THEIR IDENTITIES. THE TRIBUNAL HELD THAT IN ORDER TO CLAIM DEDUCTION OF THE COMMISSION PAID TO THE SAID AGENTS THE ASSESSEE WAS REQUIRED TO ESTABLISH THEIR IDENTITY AND THAT MERE PAYMENT BY AN ACCOUNT PAYEE CHEQUE COULD NOT ESTABLISH SUCH IDENTITY. THE TRIBUNAL SET ASIDE THE ORDER OF THE C OMMISSIONER (APPEALS) AND RESTORED THE ORDER OF THE IAC IN RESPECT OF THE SAID COMMISSION AGENTS, DISALLOWING THE DEDUCTION OF THE COMMISSION PAID TO THEM. 9. AT THE HEARING, THE LEARNED ADVOCATE FOR THE ASS ESSEE SUBMITTED THAT THE ASSESSEE HAD BROUGHT ON RECORD SUFFICIENT EVIDENCE TO ESTABL ISH THE IDENTITY OF THE SAID TWO COMMISSION AGENTS AS ALSO THE GENUINENESS OF THE PAYMENTS. HE SUBMITTED THAT THE TRANSACTIONS IN RESPECT OF WHICH COMMISSION HAD BEEN PAID WERE NOT DISPUTED BY THE REVENUE AND THE SAME HAD BEEN TAKEN INTO ACCOUNT IN MAKING THE ASSESSMENT;. THE A SSESSEE HAD ALSO ESTABLISHED ITS PRACTICE TO EFFECT TRANSACTIONS THROUGH THE COMMISSION AGENTS O N PAYMENT OF COMMISSION. CONTEMPORANEOUS CORRESPONDENCE HAD BEEN PRODUCED BY THE ASSESSEE TO SHOW THAT THE SAID TWO COMMISSION AGENTS WERE IN EXISTENCE. PAYMENTS H AD BEEN MADE BY A BANK DRAFT TO C.B. SINGH AND BY AN ACCOUNT PAYEE CHEQUE TO VANDANA SAL ES CORPN. THE CHEQUE HAD BEEN ENCASHED THROUGH THE BANK ACCOUNT OF THE COMMISSION AGENT. 10. THE MERE FACT THAT THE SUMMONS UNDER SECTION 13 1 WERE RETURNED UNSERVED IN 1978 WHEN THE ASSESSMENT WAS BEING MADE, DID NOT ESTABLI SH THAT THE SAID TWO COMMISSION AGENTS WERE NOT IN EXISTENCE IN 1974 WHEN THE TRANSACTIONS TOOK PLACE. HE SUBMITTED THAT SUMMONS HAD COME BACK UNSERVED ALSO IN THE CASE OF MINTOPCO RPN. BUT ON THAT GROUND, THE GENUINENESS OF MINTOPCORPN. HAD NOT BEEN QUESTIONED. 11. THE LEARNED ADVOCATE FOR THE ASSESSEE SUBMITTED FURTHER THAT CONSIDERING THE VOLUME OF THE BUSINESS OF THE ASSESSEE WHICH SHOWED IN ITS RETURN AN ANNUAL INCOME OF OVER RS. 37 LAKHS, THERE WAS NO REASON TO DOUBT THE GENUINEN ESS OF THE TWO PAYMENTS OF COMMISSION AMOUNTING ONLY TO ABOUT RS. 37,000. 12. IN SUPPORT OF HIS CONTENTIONS, THE LEARNED ADVO CATE FOR THE ASSESSEE CITED S. HASTIMALV. CIT [1963] 49 ITR 273 (MAD.). IN THIS CASE, THE ASSESSEE WAS CALLED UPON TO EXPLAIN THE SOURCE OF AN AMOUNT CREDITED IN HIS BOO KS. THE ASSESSEE CONTENDED THAT HE HAD BORROWED THE AMOUNT FROM A PARTY AT BIKANER WHICH H AD BEEN PAID BY THE AGENT OF THE CREDITOR BY A BANK DRAFT. THE ASSESSEE SUPPORTED HIS EXPLANA TION BY OTHER DOCUMENTARY EVIDENCE. THE EXPLANATION OF THE ASSESSEE WAS REJECTED BY THE TRI BUNAL ON THE GROUND THAT THE DRAFT WAS NOT SENT BY THE CREDITOR BUT BY SOME OTHER PERSON AND I T HAD NOT BEEN POSSIBLE TO CONTACT EITHER THE CREDITOR OR HIS AGENT. 13. ON THESE FACTS, IT WAS HELD BY THE MADRAS HIGH COURT THAT THE ASSESSEE HAD ESTABLISHED THE SOURCE OF THE SAID AMOUNT OF CREDIT AND ITS EXPLANATION COULD NOT BE REJECTED ON THE GROUND OF DISABILITY OF THE REVENUE TO ASCERTAI N FURTHER FACTS. THERE WAS NO EVIDENCE TO HOLD THAT THE SAID AMOUNT OF CREDIT WAS THE ASSESSE E'S INCOME FROM UNDISCLOSED SOURCE. ADDL. CIT V. BAHRI BROS. ( P.) LTD. [1985] 154 ITR 244 (PAT.) WAS ALSO CITED. IN THIS CASE, TWO DEPOSITS IN THE ACCOUNT OF THE ASSESSEE WERE CLAIME D TO HAVE BEEN OBTAINED ON LOAN. THE ASSESSEE ESTABLISHED THAT THE AMOUNT HAD BEEN PAID BY AN ACCOUNT PAYEE CHEQUE. THE ASSESSEE ALSO ESTABLISHED THAT IT HAD REPAID THE AMOUNTS ALS O BY ACCOUNT PAYEE CHEQUES WITH INTEREST 21 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 AND BROKERAGE. SUBSEQUENT LETTERS ADDRESSED TO THE CREDITORS FOR CONFIRMATION CAME BACK WITH THE POSTAL REMARK 'THE ADDRESSEE LEFT'. 14. ON THESE FACTS, THE PATNA HIGH COURT UPHELD THE ORDER OF THE TRIBUNAL AND LAID DOWN THAT IN THE FACTS THAT THE ASSESSEE HAD DISCHA RGED ITS PRIMARY ONUS BY DISCLOSING THE IDENTITY OF THE CREDITORS AND ALSO THE SOURCE OF IN COME. THE ONUS SHIFTED THEREAFTER TO THE REVENUE TO VERIFY. AS THE ALLEGED ADVANCE HAD BEEN PAID AND REPAID THROUGH A BANK ACCOUNT IT COULD NOT BE SAID THAT THE CREDITORS WERE FICTITIOU S PERSONS. JHA, J. OBSERVED IN HIS JUDGMENT THAT AS ALL THE TR ANSACTIONS WERE HAD THROUGH ACCOUNT PAYEE CHEQUES THE QUESTION OF IDENTITY OF THE CREDI TORS BECAME IRRELEVANT. 15. THE LEARNED ADVOCATE FOR THE REVENUE CONTENDED TO THE CONTRARY AND SUBMITTED THAT IT WAS FOR THE ASSESSEE TO ESTABLISH THE IDENTITY O F ITS COMMISSION AGENTS. IN THE FACTS, IT WAS SUBMITTED THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE PRIMARY ONUS CAST UPON IT. 16. ON A CONSIDERATION OF THE FACTS AND CIRCUMSTANC ES, IT APPEARS TO US THAT BY TAKING AN OVERALL VIEW IT IS FOUND THAT THE ASSESSEE HAD B EEN ENTERING INTO TRANSACTIONS IN ITS REGULAR COURSE OF BUSINESS THROUGH THE COMMISSION AGENTS AN D PAYING THE AGENTS COMMISSION ON THE BASIS OF THE TRANSACTION HAD ENTERED. IN RESPECT OF COMMISSIONS PAID TO THE TWO COMMISSION AGENTS WHICH ARE IN DISPUTE THE ASSESSEE HAD ESTABL ISHED THAT IN 1974 THE ASSESSEE WAS IN CORRESPONDENCE WITH THE SAID AGENTS. THE ASSESSEE H AD ENTERED INTO THE TRANSACTIONS THROUGH THE SAID AGENTS AND THAT THE ASSESSEE HAD PAID COMM ISSION TO THE SAID AGENTS, IN ONE CASE BY BANK DRAFT AND IN THE OTHER CASE BY AN ACCOUNT PAYE E CHEQUE WHICH WAS ENCASHED THROUGH A BANK ACCOUNT OF THE AGENT. IT STANDS ESTABLISHED TH AT AT THE MATERIAL TIME AT LEAST ONE OF THE COMMISSION AGENTS WAS MAINTAINING A BANK ACCOUNT. THE ONLY FACT ON WHICH THE TRIBUNAL HAS PROCEEDED I S THAT FOUR YEARS AFTER THE TRANSACTIONS, SUMMONS SERVED ON THE COMMISSION AGEN TS HAD COME BACK UNSERVED. ON THE ENTIRETY OF THE EVIDENCE IT CANNOT BE HELD THAT IF A PERSON IS NOT FOUND IN AN ADDRESS AFTER FOUR YEARS HE IS NONEXISTENT. IN OUR VIEW, THE ASSESSEE DISCHARGED ITS PRIMARY ONUS AND ESTABLISHED THE IDENTITIES OF THE SAID TWO COMMISSION AGENTS AN D NO EVIDENCE HAD BEEN BROUGHT ON RECORD BY THE REVENUE TO REBUT THE CASE OF THE ASSESSEE. O N THE ENTIRETY OF THE EVIDENCE, IT WOULD BE UNREASONABLE TO HOLD THAT THE ASSESSEE HAD FAILED T O ESTABLISH THE IDENTITY OF THE SAID TWO COMMISSION AGENTS AND THAT PAYMENTS TO THE SAID COM MISSION AGENTS WERE NOT GENUINE. 17. FOR THE REASONS AS ABOVE, WE ANSWER THE QUESTIO N REFERRED IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. THERE WILL BE NO ORDER A S TO COSTS. 28. WE FIND THAT SIMILAR ISSUE WAS ALSO INVOLVED IN THE JUDGMENT RENDERED BY THE GUJARAT HIGH COURT IN THE CASE OF CIT VS. NANGALIA FABRICS PVT. LTD (40 TAXMANN.COM 206). IN THE INSTANT CASE THE ASSESSEE HAD MADE PUR CHASES AND ALSO PAID COMMISSION TO BROKERS FOR SALES. ACCORDING TO THE AO THE SUPPLIER S WERE UNTRACEABLE AND THE CUSTOMER TO WHOM SALES WAS MADE WAS UNAWARE OF THE BROKER. THE AO THEREFORE DISALLOWED THE PURCHASES AS WELL AS THE COMMISSION HOLDING IT TO BE BOGUS. ON APPEAL THE TRIBUNAL DELETE THE ADDITION, WHICH WAS UPHELD BY THE HIGH COURT. THE RELEVANT OBSERVATIONS ARE AS FOLLOWS: 22 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 3. THE QUESTION PERTAINS TO THE PURCHASES MADE BY THE ASSESSEE-RESPONDENT. ON ACCOUNT OF UNVERIFIABLE PURCHASES, THE ASSESSING OF FICER MADE ADDITIONS TO THE TUNE OF RS. 1.27 CRORES. HE WAS OF THE OPINION THAT NONE OF THE PART IES COULD BE LOCATED AND THEREFORE, SUCH PURCHASES WERE HELD TO BE BOGUS. WHEN IT WAS CHALLE NGED BEFORE THE CIT(A), THE CIT(A) WAS OF THE OPINION THAT THEY COULD NOT BE HELD BOGUS AS THE CORRESPONDING SALES HAD BEEN EFFECTED BY THE RESPONDENT IN THE NEXT YEAR. IN SUBSEQUENT Y EAR ALSO AND IN THE PAST, SUCH PURCHASES WERE MADE WHICH WERE NEVER QUESTIONED. WHEN CHALLEN GED BEFORE THE TRIBUNAL ON THE BASIS OF THE FACTS PRESENTED BEFORE US, IT HELD THAT THESE P URCHASES COULD NOT BE HELD BOGUS BY HOLDING THUS: '13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND T HE MATERIALS PLACED ON RECORD. THE PURCHASES ARE SUPPORTED BY BILLS, ENTRIES IN TH E BOOKS OF ACCOUNT, PAYMENT BY CHEQUE AND QUANTITATIVE DETAILS ASSESSING OFFICER DID NOT FIND ANY INFLATION IN PURCHASE PRICE OR INFLATION IN CONSUMPTION OR SUPPRESSION THE PRODUCTION. THE A DDITION HAD BEEN MADE ONLY ON THE GROUND THAT THE PARTIES ARE NOT TRACEABLE. ASSESSEE HAD MADE PAYMENT THROUGH CROSSED CHEQUES AND ASSESSING OFFICER DID NOT FIND THAT PAY MENT MADE CAME BACK TO ASSESSEE. ASSESSING OFFICER HAS MADE ADDITION IN RESPECT TO T HE OUTSTANDING AMOUNT AS ON 31.3.2001 WHICH HAS BEEN CLEARED IN THE SUCCEEDING YEARS. THE RATIO OF THE CREDITOR TO THE PURCHASES IS NORMAL CONSIDERING THE PAST RECORDS OF THE ASSESSEE . THE CREDITORS WERE OUTSTANDING OWING TO LIQUIDITY AS ASSESSEE IS ALSO REQUIRED TO GET CREDI T IN RESPECT OF SALES ALSO. EVEN OTHERWISE PROVISION OF SECTION 68 IS NOT ATTRACTED TO AMOUNTS REPRESENTING PURCHASES MADE ON CREDIT AS HELD IN THE CASE OF PANCHAN DASS JAIN CITED SUPRA. THE ADDITION FOR BOGUS PURCHASES CANNOT ALSO BE SUSTAINED IN FULL OR IN PART IN VIEW OF THE VARIOUS CASES LAWS CITED BY THE ASSESSEE AND IN VIEW OF THE FACTS THAT THE DECISION OF VIJAY PRO TEINS LTD. AND SANJAY OIL CAKE INDUSTRIES ARE NOT APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE. ASSESSEE'S CASE IS COVERED BY THE DECISION OF HON'BLE GUJARAT HIGH COURT IN CASE OF KASHIRAM TEXT ILE MILLS. IN VIEW OF THE MATTER, ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. GROUND NO .1 OF ASSESSEE'S APPEAL IS ALLOWED AND GROUND NO.1 OF REVENUE'S APPEAL IS DISMISSED.' 4. THE ISSUE IS ESSENTIALLY BASED ON FACTS. THE TRI BUNAL, HAVING BEEN SATISFIED BY GENUINENESS OF THE PURCHASES AS ALSO SPECIALLY CONS IDERING THE PAYMENTS MADE THROUGH THE CHEQUES, WAS OF THE OPINION THAT SUCH ADDITION COUL D NOT BE SUSTAINED. ISSUE, ESSENTIALLY AND PRE-DOMINANTLY BASED ON FACTS, REQUIRES NO CONSIDER ATION AS NO QUESTION OF LAW ARISES. 5. THE SECOND QUESTION PERTAINS TO BROKERAGE COMMIS SION OF RS. 72,37,808/- DISALLOWED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER DISALLOWED THE COMMISSION ON THE GROUND THAT M/S. SHREE SHANTINATH SILK INDUSTRIES D ID NOT MAINTAIN ITS RECORD AND ITS NAME DID NOT APPEAR ON SALE BILL. WHEN IT WAS CHALLENGED BEF ORE THE CIT(A) IT WAS OF THE OPINION THAT THE ONLY ONE PARTY HAD BEEN EXAMINED BY THE ASSESSI NG OFFICER AND THE PERSON EXAMINED FOR AND ON BEHALF OF SUCH PARTY IN FACT WAS NOT DEALING WITH SALES, AND THEREFORE, WOULD NOT BE HAVING ANY KNOWLEDGE OF THE BROKERAGE. AFTER DEALIN G WITH THE ISSUE AT LENGTH, IT SUSTAINED ADDITION OF RS. 36.18 LACS (ROUNDED OFF). 6. WHEN CIT(A)'S ORDER WAS CHALLENGED BEFORE THE TR IBUNAL, THE TRIBUNAL DELETED THE ENTIRE ADDITION BY OBSERVING THUS: '23. WE HAVE HEARD THE RIVAL SUBMISSIONS AND THE MA TERIALS PLACED ON RECORD. WE ARE INCLINED TO AGREE WITH THE SUBMISSION MADE ON BEHAL F OF THE ASSESSEE AND FIND THAT NO EVIDENCE HAD BEEN PLACED ON RECORD THAT THE COMMISSION EXPEN SE IS BOGUS. ASSESSEE MADE PAYMENT OF COMMISSION EXPENSES IS BOGUS. ASSESSEE MADE PAYMENT OF COMMISSION THROUGH ACCOUNT PAYEE CHEQUES FOR SALES CANVASSED BY THE PARTY AND ALSO I N CONSIDERATION OF THE COLLECTION RECOVERED FROM PURCHASER. PAYMENTS CANNOT BE UNREASONABLE PAR TICULARLY WHEN M/S. SHREE SHANTINATH SILK INDUSTRIES IS NOT RELATED TO THE ASSESSEE AND SO EVEN DISALLOWANCE MADE BY CIT(A) IS NOT PROPER. WE THEREFORE DELETE THE FULL DISALLOWANCE O F RS. 72,37,808/- MADE BY THE ASSESSING 23 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 OFFICER. HENCE ASSESSEE'S GROUND OF APPEAL IS ALLOW ED AND REVENUE'S GROUND OF APPEAL IS ALLOWED AND REVENUE'S GROUND OF APPEAL IS DISMISSED .' 7. THIS ISSUE IS AGAIN BASED ON FACTS. ESSENTIALLY, THE TRIBUNAL HAS, WITH COGENT REASONS DEALT WITH THE ISSUE, NO QUESTION OF LAW, M UCH LESS ANY SUBSTANTIAL QUESTION OF LAW ARISES. THE TAX APPEAL IS, RESULTANTLY, DISMISSED. 29. WE ARE OF THE CONSIDERED VIEW THAT THE ABOVE JU DGMENTS OF THE JURISDICTIONAL HONBLE CALCUTTA HIGH COURT AND ALSO THE HONBLE GUJARAT HI GH COURT ARE SQUARELY APPLICABLE TO THE FACTS INVOLVED IN THE PRESENT CASE. IN THE PRESENT CASE THE ASSESSEE HAS FURNISHED COMPLETE DETAILS WITH REGARD TO THE COMMISSION & SERVICE FEE S PAID TO THE PAYEES. THE ASSESSEE HAS FURNISHED COMPLETE DETAILS OF PAYEES INCLUDING COPI ES OF INVOICES, PAN, ST CERTIFICATE, CONFIRMATION AND CERTIFICATE U/S 197 OF THE ACT. WE NOTE THAT THE AO WAS UNABLE TO POINT OUT ANY SPECIFIC DEFECT OR INFIRMITY IN THE DETAILS FUR NISHED BY THE ASSESSEE. IN OUR CONSIDERED VIEW, MERE NON-SERVICE OF NOTICE U/S 133(6) DOES NO T MAKE AN ASSESSEE BOGUS OR AN ENTRY OPERATOR. FURTHER THE FACT THAT THE CORRECTNESS & G ENUINENESS OF THE CERTIFICATE U/S 197 HAS NOT BEEN DOUBTED BY THE AO, IT CANNOT BE SAID THAT CERTIFICATE U/S 197 WAS ISSUED BY THE DEPARTMENT TO BOGUS OR NON-EXISTENT ENTITIES. INSTE AD IT WENT ON TO ESTABLISH THE IDENTITY OF THE PAYEES, AND THAT THEY WERE REGULAR INCOME-TAX A SSESSEES. WE THEREFORE NOTE THAT THE ASSESSEE HAD DULY DISCHARGED ITS ONUS OF SUBSTANTIA TING THE GENUINENESS AND BUSINESS EXPEDIENCY BEHIND THE PAYMENTS AS WELL AS THE IDENT ITY & CREDITWORTHINESS OF THE PAYEES. 30. FOR THE REASON SET OUT ABOVE WE THEREFORE HOLD THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN DISALLOWING THE EXPENSES INCURRED TOWA RDS COMMISSION AND ANNUAL MAINTENANCE FEES OF RS.1,92,65,164/- AND RS.4,40,58,520/- RESPE CTIVELY. THE AO IS DIRECTED TO ALLOW THE DEDUCTION FOR THE EXPENSES INCURRED TOWARDS COMMISS ION AND ANNUAL MAINTENANCE FEES IN ARRIVING AT THE PROFITS OF THE BUSINESS. ACCORDINGL Y THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 31. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 22/11/201 8 SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22ND NOVEMBER, 2018 RS.(SR.P.S.) 24 ITA NO. 782/KOL/2016 TIRUMALA SEVEN HILLS PVT. LTD., AY 2011-12 COPY OF THE ORDER FORWARDED TO: 1 APPELLANT TIRUMALA SEVEN HILLS PVT. LTD., C/O D. J. SHAH & CO. KALYAN BHAVAN, 2, ELGIN ROAD, KOLKATA-700 020. 2 RESPONDENT JCIT, RANGE-4, KOLKATA. 3 4 5 CIT(A)-6, KOLKATA. (SENT THROUGH E-MAIL) CIT, KOLKATA. DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY