Sayaji Industries Limited, Ahmedabad V. The Dy.CIT., Spe.Range-7, Ahmedabad

ITA 797/AHD/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1746 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-12-2009
• Assessment Year: 1992-1993
• Appeal Filed On: 19-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGARWAL
• Keywords: Diversion of income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE DR.O.K. NARAYANAN, VICE-PRESIDENT AND SHRI BHAVNESH SAINI, JUDICIAL MEMBER) ITA NO.797/AHD/2007 [ASSTT.YEAR:1992-1993] SAYAJI INDUSTRIES LTD. P.O. KATHWADA AHMEDABAD. VS. DCIT, SPL.RANGE-7 AHMEDABAD. ITA NO.1349/AHD/2007 [ASSTT.YEAR:1992-1993] DCIT(OSD),CIRCLE-8 AHMEDABAD. VS. SAYAJI INDUSTRIES LTD. P.O. KATHWADA-MAIZE PRODUCTS AHMEDABAD. ASSESSEE BY : SHRI J.P.SHAH WITH SHRI MANISH.J.SHAH REVENUE BY : SHRI RAJEEV AGARWAL DATE OF ORDER RESERVED : 09-12-2009 O R D E R PER DR.O.K. NARAYANAN, VICE-PRESIDENT : THESE ARE TWO CROSS-APPEALS FILED BY THE ASSESSEE AND THE REVENUE RESPECTIVELY. THE ASSESSMENT YEAR IS 1992-93. THE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-XIV AT AHMEDABAD DATED 1 8-12-2006 AND ARISE OUT OF THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. AS FAR AS THE APPEAL FILED BY THE ASSESSEE IS CO NCERNED, THE ONLY GROUND IS THAT THE CIT(A) HAS ERRED IN SUSTAINING P ARTIAL DISALLOWANCE AMOUNTING TO RS.7,50,482/- OUT OF THE COMMISSION PA ID BY THE ASSESSEE TO PAGE - 2 SAYAJI INDUSTRIES LTD. VS. DCIT (ASSTT.YEAR : 1992-1993) -2- ITS SOLE SELLING AGENT, M/S.L.G.& DOCTORS ASSOCIATE S PVT. LTD., (LGDA FOR SHORT) AND CLAIMED AS DEDUCTION IN COMPUTING IT S TAXABLE INCOME. 3. IN THE APPEAL FILED BY THE REVENUE, THE ONLY GRO UND IS THAT THE CIT(A) HAS ERRED IN DELETING SUBSTANTIAL PORTION OF THE DISALLOWANCE MADE BY THE ASSESSING AUTHORITY AGAINST THE CLAIM MADE B Y THE ASSESSEE RELATING TO THE PAYMENT OF COMMISSION TO ITS SOLE SELLING AG ENTS. IT IS THE GROUND OF THE REVENUE THAT THE CIT(A) HAS ERRED IN SUSTAIN ING ONLY A PARTIAL DISALLOWANCE OF RS.7,50,482/- AS AGAINST THE DISALL OWANCE OF RS.1,27,57,505/- MADE BY THE ASSESSING AUTHORITY. 4. M/S.LGDA WAS APPOINTED AS SOLE SELLING AGENT O F THE ASSESSEE- COMPANY WITH ALL INDIA COVERAGE. THE ASSESSEE-COMP ANY IS ENGAGED IN THE BUSINESS OF PRODUCTION OF MAIZE. THE ASSESSEE BEING A PUBLIC LIMITED COMPANY, SOLE SELLING AGENT HAS BEEN APPOINTED IN T ERMS OF THE APPROVAL GIVEN BY THE SHAREHOLDERS IN THE ANNUAL GENERAL MEE TING AND ALSO BY THE CENTRAL GOVERNMENT AS REQUIRED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. M/S.LGDA WAS APPOINTED AS A SOLE SELL ING AGENT ON THE BASIS OF AN AGREEMENT DATED 25-10-1988. ON THE BAS IS OF THE SOLE SELLING AGENCY AGREEMENT, THE ASSESSEE CLAIMED A DEDUCTION OF RS.1,27,57,505/- AS THE COMMISSION ATTRIBUTABLE TO THE SERVICES REND ERED BY M/S. LGDA. THIS AMOUNT WAS DEDUCTED IN COMPUTING THE TAXABLE I NCOME OF THE ASSESSEE-COMPANY FOR THE IMPUGNED ASSESSMENT YEAR 1 992-93. 5. BUT THE AO FOUND THAT THE PAYMENT OF SOLE SELLIN G AGENCY COMMISSION CANNOT BE ACCEPTED ON VARIOUS GROUNDS. HIS FIRST OBSERVATION WAS THAT THE QUANTUM OF SOLE SELLING AGENCY COMMISS ION TO THE EXTENT OF RS.1,27,57,505/- WAS INCREDIBLE WHEN COMPARED TO TH E TOTAL INCOME OF THE PAGE - 3 SAYAJI INDUSTRIES LTD. VS. DCIT (ASSTT.YEAR : 1992-1993) -3- ASSESSEE DECLARED AT RS.3,10,41,532/-. THE AO HELD THAT THE PAYMENT OF COMMISSION AT THE RATE OF 41.10% OF THE PERCENTAGE OF TOTAL INCOME IS HIGHLY EXAGGERATED AND IMPROBABLE. IN THE LIGHT OF THE ABOVE APPREHENSION, THE AO EXAMINED THE SOLE SELLING AGEN CY AGREEMENT AND CAME TO A CONCLUSION THAT THE AGREEMENT WAS NOT GEN UINE AND IT WAS ONLY A MAKE-BELIEF AGREEMENT EXECUTED BETWEEN THE ASSESS EE AND THE LGDA WITH A VIEW TO DIVERT THE PROFITS TAXABLE IN THE HA NDS OF THE ASSESSEE. THE AO ALSO HELD THAT M/S. LGDA HAS NOT RENDERED SERV ICES COMMENSURATE TO THE HUGE AMOUNT OF COMMISSION PAID BY THE ASSESS EE. IN THE LIGHT OF THE ABOVE OBSERVATIONS, THE ASSESSING AUTHORITY DIS ALLOWED THE ENTIRE CLAIM OF RS.1,27,57,505/- AND ADDED BACK TO THE INC OME OF THE ASSESSEE. 6. IN FIRST APPEAL, THE CIT(A) EXAMINED THE TERMS A ND CONDITIONS OF THE AGREEMENTS IN DETAILED MANNER AND ALSO THE EXPL ANATIONS OF THE ASSESSEE-COMPANY IN RESPECT OF THE SERVICES RENDERE D BY M/S. LGDA AS SOLE SELLING AGENT. HE FOUND THAT THE SOLE SELLING AGENT HAS BEEN RENDERING SERVICES IN MULTIFARIOUS WAYS RELATING TO THE CANVA SSING OF ORDERS, COLLECTION OF SALES PROCEEDS, FOLLOW-UP OF DELIVERY SCHEDULES OF CONSIGNMENTS, COLLECTING OF STATUTORY FORMS LIKE C FORMS FROM VARIOUS PARTIES ETC. HE FOUND THAT THE SOLE SELLING AGENT WAS RENDERING SUFFICIENT SERVICES TO THE ASSESSEE-COMPANY COMPARABLE TO THE TERMS AND CONDITIONS LAID DOWN IN THE SOLE SELLING AGENCY AGREEMENT. TH E CIT(A) ALSO ADDRESSED THE ISSUE RAISED BY THE AO WHETHER THE SO LE SELLING AGENT, M/S. LGDA HAD VIOLATED ANY OF THE IMPORTANT CONDITIONS OF THE AGREEMENT. THE CIT(A) FOUND THAT THERE WAS NO VIOLATION OF ANY STIPULATIONS REFLECTED IN THE SOLE SELLING AGENCY AGREEMENT. HE HAS ALSO CALLED FOR A REMAND REPORT FROM THE ASSESSING AUTHORITY AND IN THE LIGH T OF THE MATERIALS AVAILABLE BEFORE HIM, CONCLUDED THAT THE PAYMENT OF SOLE SELLING AGENT PAGE - 4 SAYAJI INDUSTRIES LTD. VS. DCIT (ASSTT.YEAR : 1992-1993) -4- COMMISSION IS JUSTIFIED EXCEPT TO THE EXTENT OF RS. 7,50,482/-. ON THE BASIS OF THE DETAILS AVAILABLE BEFORE HIM, THE CIT( A) FOUND THAT THE ASSESSEE HAD MADE DIRECT SALES TO EIGHT PARTIES FOR RS.2,85,49,075/- AND NO ROLE WAS PLAYED BY THE SOLE SELLING AGENT IN THE AB OVE SALE TRANSACTIONS. HE THEREFORE HELD THAT THERE WAS NO JUSTIFICATION I N PAYING ANY SOLE SELLING AGENCY COMMISSION WITH REFERENCE TO THE ABOVE SALE TURNOVER OF RS.2,85,49,075/-. ACCORDINGLY, HE CONFIRMED PROPOR TIONATE DISALLOWANCE OF COMMISSION PAYMENT OF RS.7,50,482/-. HE DELETED THE BALANCE AMOUNT. 7. SHRI J.PSHAH ALONG WITH SHRI MANSIH J. SHAH APPE ARED FOR THE ASSESSEE-COMPANY AND ARGUED THE CASE AT LENGTH. 8. THE LEARNED COUNSEL ARGUED THAT THE AGREEMENT WA S EXECUTED WAY BACK ON 25-10-1988 AND THE SOLE SELLING AGENTS WERE WORKING FOR THE COMPANY SINCE THEN AND THE FACTUM OF SERVICES RENDE RED BY THE SOLE SELLING AGENTS AND CORRESPONDING COMMISSION PAID TO THEM HAVE BEEN CONSISTENTLY ACCEPTED BY THE DEPARTMENT IN RESPECT OF THE ASSESSMENTS CONCLUDED FOR EARLIER ASSESSMENT YEARS AS WELL AS F OR ASSESSMENTS CONCLUDED FOR SUBSEQUENT ASSESSMENT YEARS. THE CON TENTION OF THE LEARNED COUNSEL IS THAT IT IS ONLY FOR THE IMPUGNED ASSESSMENT YEAR 1992- 93 THAT THE AO HAS RAISED THE OBJECTION THAT THE PA YMENT OF COMMISSION WAS NOT GENUINE. AS EXPLAINED BY THE ASSESSEE AND ACCEPTED BY THE CIT(A), MATERIALS ON RECORD WOULD PROVE THAT THE SO LE SELLING AGENTS HAVE RENDERED THE SERVICES TO THE ASSESSEE-COMPANY AS ST IPULATED IN THE AGREEMENT AND THEREFORE THE PAYMENT OF COMMISSION W AS LEGITIMATE AND IN THE NATURE OF EXPENSES INCURRED FOR THE PURPOSE OF BUSINESS. THE LEARNED COUNSEL EXPLAINED THAT THE CIT(A) HAS CONFI RMED THE PAGE - 5 SAYAJI INDUSTRIES LTD. VS. DCIT (ASSTT.YEAR : 1992-1993) -5- DISALLOWANCE IN RESPECT OF THE COMMISSION ATTRIBUTA BLE TO THE SALES MADE TO CERTAIN PARTIES ON THE GROUND THAT THE SALES WER E MADE BY THE ASSESSING AUTHORITY DIRECTLY TO THEM. THAT FINDING IS NOT CO RRECT. EVEN THOUGH THE SOLE SELLING AGENTS ARE ENTRUSTED WITH THE WORK OF MARKETING AND SALE OF THE PRODUCTS OF THE ASSESSEE-COMPANY AND THE COLLEC TION OF THE SALE PROCEEDS, IT IS COMMON THAT CUSTOMERS OF BULK PURCH ASES WOULD DIRECTLY CONTACT THE ASSESSEE-COMPANY FOR DIFFERENT PURPOSES AND SUCH CONNECTION BETWEEN THE ASSESSEE-COMPANY AND THE PURCHASERS DOE S NOT MEAN THAT THE SALES WERE MADE TO THOSE PARTIES BY DIRECT CHANNEL BYE-PASSING THE SOLE SELLING AGENTS. HE THEREFORE SUBMITTED THAT EVEN T HE PARTIAL DISALLOWANCE CONFIRMED BY THE CIT(A) IS NOT JUSTIFIED AND IS CON TRARY TO HIS OWN FINDING. 8. THE LEARNED COUNSEL EXPLAINED THAT THE SOLE SELL ING AGENCY AGREEMENT IS NOT DISPUTED. THE SAID AGREEMENT HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE ASSESSMENTS PERTAINING TO THE ASS ESSMENT YEARS PRIOR TO THE IMPUGNED ASSESSMENT YEAR 1992-93. THOSE ASSESS MENTS WERE UNDER SECTION 143(3). IT MEANS THAT THE PARTICULARS RELA TING TO THE PAYMENT OF SOLE SELLING AGENCY COMMISSION HAVE BEEN SCRUTINIZE D BY THE ASSESSING AUTHORITY IN THE COURSE OF ASSESSMENTS COMPLETED FO R THE EARLIER ASSESSMENT YEARS. THIS POSITION CLEARLY ESTABLISHE D THAT THE AGREEMENT WAS NOT A SHAM OR A MAKE-BELIEF ARRANGEMENT. THE S AME POSITION CONTINUED FOR THE ASSESSMENTS COMPLETED FOR THE SUB SEQUENT ASSESSMENT YEARS AS WELL. THEREFORE, WHEN THE EXISTENCE OF TH E SOLE SELLING AGENCY AGREEMENT IS ACCEPTED BY THE ASSESSING AUTHORITY IN A CONSISTENT MANNER FOR A NUMBER OF ASSESSMENT YEARS, THE SAID ACCOMPLI SHED TRUTH CANNOT BE DISTURBED BY CERTAIN PERIPHERAL OBSERVATIONS ASSESS MENT MADE BY THE ASSESSING AUTHORITY FOR THE IMPUGNED ASSESSMENT YEA R 1992-93. THERE IS PAGE - 6 SAYAJI INDUSTRIES LTD. VS. DCIT (ASSTT.YEAR : 1992-1993) -6- NO EVIDENCE AVAILABLE ON RECORD TO SHOW THAT THE AG REEMENT WAS A SHAM OR COMMISSIONS WERE NOT PAID BY THE ASSESSEE-COMPAN Y AND M/S. LGDA HAD NOT RENDERED ANY SERVICE TO THE ASSESSEE -COMPANY. HE THEREFORE SUBMITTED THAT THE PARTIAL DISALLOWANCE C ONFIRMED BY THE CIT(A) TOO IS TO BE DELETED TO DO JUSTICE TO THE FACTS AND CIRCUMSTANCES. 9. SHRI RAJIV AGARWAL, LEARNED COMMISSIONER OF INCO ME-TAX WHO APPEARED FOR THE REVENUE DEFENDED THE ORDERS OF THE ASSESSING AUTHORITY. HE EXPLAINED THAT THE AO HAS EXAMINED METICULOUSLY THE FACTS AND CIRCUMSTANCES SURROUNDING THE CLAIM OF DEDUCTION MA DE BY THE ASSESSEE- COMPANY TOWARDS THE SOLE SELLING AGENCY. HE POINTE D OUT THAT THE PRODUCTS OF THE ASSESSEE-COMPANY ARE SOLD THROUGH A NUMBER OF AGENTS SPREAD ALL OVER INDIA AND IT IS NOT CORRECT TO SAY THAT THE SALES ARE MADE BY THE ASSESSEE-COMPANY ONLY THROUGH THE SOLE SELLING AGENTS. IT IS THE CASE OF THE LEARNED COMMISSIONER THAT THESE AGENTS ARE S TATED TO BE FUNCTIONING INDEPENDENTLY AND ARE DEALING WITH THE ASSESSEE-COM PANY DIRECTLY, WHICH SHOWED THAT THE ARRANGEMENT OF SOLE SELLING AGENCY WAS ONLY A SHAM ARRANGEMENT. 10. THE LEARNED COMMISSIONER FURTHER EXPLAINED THAT A VERIFICATION OF THE CLAIM OF THE SERVICES RENDERED BY THE SOLE SELL ING AGENTS HAS BEEN SHATTERED BY THE FACT THAT THE EIGHT PARTIES WHO WE RE EXAMINED IN THIS REGARD HAD DENIED THE INVOLVEMENT OF THE SOLE SELLI NG AGENTS AND HAD CONFIRMED THAT THEY HAVE MADE THE PURCHASES DIRECTL Y FROM THE ASSESSEE- COMPANY. THE LEARNED COMMISSIONER EXPLAINED THAT T HERE ARE MORE THAN THREE HUNDRED PARTIES ALL OVER INDIA DEALING WITH T HE ASSESSEE-COMPANY AND IT WAS NOT POSSIBLE FOR THE AO TO EXAMINE ALL O F THEM. THEREFORE, THE AO HAS EXAMINED THE EIGHT PARTIES AS RELIABLE SAMPL ES, WHERE IT WAS PAGE - 7 SAYAJI INDUSTRIES LTD. VS. DCIT (ASSTT.YEAR : 1992-1993) -7- CATEGORICALLY FOUND THAT THE SALES WERE DIRECTLY MA DE. ACCORDING TO THE LEARNED COMMISSIONER, THE INVESTIGATION CARRIED OUT BY THE ASSESSING AUTHORITY HAS PROVED BEYOND DOUBT THAT M/S. LGDA HAD NO ROLE IN GENERATING SALES FOR THE ASSESSEE-COMPANY AND THE P AYMENT OF SOLE SELLING AGENTS COMMISSION WAS ONLY A DIVERSION OF INCOME AN D NOT A DEDUCTIBLE EXPENDITURE IN COMPUTING THE TAXABLE INCOME OF THE ASSESSEE-COMPANY. 11. WE HEARD BOTH THE SIDES IN DETAIL AND CONSIDERE D THE MATTER. THE SOLE SELLING AGENCY AGREEMENT WAS EXECUTED ON 25-10 -1988. AS PER THE AGREEMENT, M/S. LGDAWAS APPOINTED AS THE SOLE SEL LING AGENT OF THE ASSESSEE-COMPANY FOR ENTIRE COUNTRY. THE ASSESSEE HAS BEEN CLAIMING THE SOLE SELLING AGENCY COMMISSION AS DEDUCTION SINCE A SSESSMENT YEAR 1989- 90 ONWARDS. THE ASSESSMENT FOR THE ASSESSMENT YEAR S 1989-90 TO 1991- 92 WERE COMPLETED AND THE CLAIM OF THE ASSESSEE TOW ARDS PAYMENT OF THE SOLE SELLING AGENCY COMMISSION WAS CONSISTENTLY ACC EPTED BY THE DEPARTMENT. THE PAYMENT OF COMMISSION ON THE BASIS OF THE VERY SAME AGREEMENT HAS ALSO BEEN ACCEPTED BY THE DEPARTMENT IN THE ASSESSMENTS COMPLETED FOR THE ASSESSMENT YEARS FALLING AFTER TH E IMPUGNED ASSESSMENT YEAR 1992-93. MANY OF THESE ASSESSMENTS HAVE BEEN COMPLETED UNDER SECTION 143(3). THEREFORE, IT IS NECESSARY TO HOLD THAT THE QUESTION OF APPOINTMENT OF SOLE SELLING AGENTS AND PAYMENT OF S OLE SELLING AGENCY COMMISSION HAVE BEEN EXAMINED BY THE ASSESSING AUTH ORITY TIME AND AGAIN IN THE ASSESSMENTS COMPLETED FOR VARIOUS ASSE SSMENT YEARS INCLUDING THE ASSESSMENTS FINALIZED UNDER SECTION 1 43(3). THIS POSITION STRENGTHENS THE CONTENTIONS OF THE ASSESSEE-COMPANY THAT THE SOLE SELLING AGENCY WAS A GENUINE BUSINESS ARRANGEMENT. THIS AL SO SUPPORTS THE ARGUMENTS OF THE ASSESSEE-COMPANY THAT IT HAD RECEI VED SERVICES FROM SOLE SELLING AGENT, M/S. LGDA AND THERE WAS NO VI OLATION OF ANY TERMS PAGE - 8 SAYAJI INDUSTRIES LTD. VS. DCIT (ASSTT.YEAR : 1992-1993) -8- AND CONDITIONS STIPULATED IN THE SOLE SELLING AGENC Y AGREEMENT. WHEN THESE RELEVANT MATTERS ARE ACCEPTED AS FACTS IN THE ASSESSMENTS BY THE ASSESSING AUTHORITY IN A CONSISTENT MANNER FOR A NU MBER ASSESSMENT YEARS, IT IS NECESSARY FOR THE REVENUE TO COLLECT FORMIDAB LE EVIDENCE TO TAKE A DIFFERENT VIEW FOR THE IMPUGNED ASSESSMENT YEAR 199 2-93. A SIMPLE RULE OF PROBABILITY ON THE BASIS OF GENERAL OBSERVATIONS ALONE WILL NOT SUFFICIENT TO UNDO THE FINDING ARRIVED AT BY THE AS SESSING AUTHORITY FOR SO MANY ASSESSMENT YEARS. THE ONUS CAST ON THE REVENU E TO UNDO THE FINDING ARRIVED AT IN EARLIER AND SUBSEQUENT YEARS, IS IN FACT ONEROUS. IN THE PRESENT CASE, EXCEPT FOR THE EIGHT PARTIES MENT IONED BY THE CIT(A), NO OTHER PARTIES HAS STATED THAT IT HAD PURCHASED GOOD S FROM THE ASSESSEE- COMPANY DIRECTLY. EVEN THE EIGHT PARTIES, WHO HAD STATED THAT THE PURCHASES WERE MADE BY THEM DIRECTLY FROM THE ASSES SEE-COMPANY, HAVE NOT STATED ANYTHING AGAINST THE EXISTENCE AND ROLE OF THE SOLE SELLING AGENT, M/S. LGDA. RATHER NO SUCH QUESTION WAS PUT TO TH OSE EIGHT PARTIES. IT SHOWS THAT EVEN THE EXAMINATION OF THOSE PARTIES WA S LACKADAISICAL. THE STATEMENT OF THE EIGHT PARTIES THAT SALES WERE DIRE CTLY MADE BY THE ASSESSEE-COMPANY DOES NOT DISCREDIT THE AGREEMENT E NTERED INTO BY THE ASSESSEE-COMPANY AND ITS ARGUMENTS RELATING TO THE PAYMENT OF THE SOLE SELLING AGENCY COMMISSION AGAINST THE SERVICES REND ERED BY THE AGENT. AS RIGHTLY ARGUED BY THE LEARNED COUNSEL, THE AGENCY G IVEN BY THE ASSESSEE DOES NOT MEAN THAT THERE ARE NO RELATIONS BETWEEN T HE BUYERS AND THE ASSESSEE COMPANY. IT IS TO BE SEEN THAT THE SOLE S ELLING AGENTS ARE ACTED FOR AND ON BEHALF OF THE ASSESSEE-COMPANY. THE INT EREST OF THE ASSESSEE- COMPANY IN ITS RELATIONS WITH ITS CUSTOMERS IS NOT DILUTED OR IT SHOULD BE OVERLOOKED FOR THE REASON THAT THE SALES ARE GENERA TED/MANAGED BY THE SOLE SELLING AGENTS. THE BUSINESS RELATIONS BETWEE N THE ASSESSEE-COMPANY PAGE - 9 SAYAJI INDUSTRIES LTD. VS. DCIT (ASSTT.YEAR : 1992-1993) -9- AND ITS CUSTOMERS HAVE TO SUBSIST IN SPITE OF THE I NTERVENTION OF A SOLE SELLING AGENT. THE ASSESSEE COMPANY CARRYING ON TH E BUSINESS IN SUCH A LARGE EXTENT SHOULD HAVE RELATION WITH ITS VALUED C USTOMERS. THEREFORE, IT IS NOT POSSIBLE TO HOLD THAT THE SALES MADE TO EVEN THOSE EIGHT PARTIES WERE IN FACT DIRECT SALES AS CONSTRUED BY THE CIT(A). E VEN WHERE THE SALES ARE PROCURED BY THE SOLE SELLING AGENTS, THE ASSESSEE M IGHT HAVE INTERACTED WITH THE PARTIES FOR VERY MANY REASONS, INCLUDING T HE SUPPLY SCHEDULE AND LOGISTIC SUPPORT ETC. 12. THEREFORE, WE FIND THAT THE IMPRESSION MADE BY THE CIT(A) ON THE BASIS OF STATEMENT RENDERED BY THE EIGHT PARTIES IS NOT SUBSTANTIATED WHEN THE FACTS AND CIRCUMSTANCES OF THE CASE ARE EXAMINE D IN A COMPREHENSIVE MANNER. THERE IS NOTHING ON RECORD TO SHOW THAT TH E SOLE SELLING AGENT HAS NOT RENDERED ANY SERVICES IN RESPECT OF THE SAL ES MADE TO A LARGE NUMBER OF CUSTOMERS OTHER THAN THE EIGHT CUSTOMERS WHO HAD GIVEN STATEMENT BEFORE THE AUTHORITIES. 13. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE REVENUE HAS NOT SUCCEEDED IN DEMOLISHING THE DEFENSE OF CON SISTENCY ARGUED BY THE ASSESSEE-COMPANY. THE ONEROUS RESPONSIBILITY C AST UPON THE ASSESSING AUTHORITY TO DISCREDIT THE AGREEMENT OF T HE SOLE SELLING AGENTS HAS NOT BEEN DISCHARGED. THE OBSERVATIONS OF THE A SSESSING OFFICER ALLEGING THE VIOLATION OF TERMS AND CONDITIONS OF T HE AGENCY AGREEMENT ARE NOT CONVINCING. 14. IN THE LIGHT OF THE ABOVE, WE FIND THAT THE THE RE IS NO JUSTIFICATION EVEN IN SUSTAINING A PARTIAL DISALLOWANCE OF ADDITI ON OF RS.7,50,000/- PAGE - 10 SAYAJI INDUSTRIES LTD. VS. DCIT (ASSTT.YEAR : 1992-1993) -10- AGAINST THE ASSESSEE. THE SAID ADDITION SUSTAINED BY THE CIT(A) IS DELETED. 15. THE ASSESSEE IS SUCCESSFUL IN ITS APPEAL. OBVI OUSLY FOR NO FURTHER REASONS, THE REVENUE FAILS IN ITS APPEAL. 16. IN RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THIS 16 TH DAY OF DECEMBER, 2009. SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (DR.O.K. NARAYANAN) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 16-12-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD