Smt. Pramila Jain, Kanpur V. Asstt. Commissioner of Income Tax, Kanpur

ITA 813/LKW/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3930 (ITAT-LUCKNOW)
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 22-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K VISHWAKARMA
• Keywords: Depreciation; Commercial expediency
• Section: 143(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH SMC , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 813/LKW/2017 ASSESSMENT YEAR: 2013 - 14 SMT. PRAMILA JAIN 54/1, NAYA GANJ KANPUR V. ACIT RANGE I KANPUR T AN /PAN : ACFPJ6507J (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI ASHISH JAISWAL, ADVOCATE RESPONDENT BY: SHRI R. K. VISHWAKARMA, D.R. DATE OF HEARING: 06 08 201 8 DATE OF PRONOUNCEMENT: 10 08 201 8 O R D E R PER P ARTHA SARATHI CHAUDHURY, J.M : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A) - I, KANPUR DATED 29/8/2017 ON THE FOLLOWING GROUNDS OF APPEAL: - 1 . THAT THE LEARNED CIT (A PPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING O FFICER OF RS. 8,00,000.00 ON ACCOUNT OF COMMISSION PAID. 2 . THAT THE LEARNED CIT ( A PPEALS) HAS ERRED IN NOT ADJUDICATING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS. 15,765.00 ON ACCOUNT OF INTEREST PAID ON CAR LOAN. 3 . THAT THE LEARNED CIT ( A PPEALS) HAS ERRED IN CONFIRMING THE AD - HOC DISALLOWANCE MADE BY THE ASSESSING OFFICER OF ITA NO.813/LKW/2017 PAGE 2 OF 7 RS. 97,783.00 OUT OF TRAVELLING, DEPRECIATION, INSURANCE AND OTHER VEHICLE EXPENSES AND ELECTRICITY EXPENSES. 4 . THAT THE LEARNED CIT ( A PPEALS) HAS ERRED IN CONFIRMING THE AD - HOC DISA LLOWANCE MADE BY THE ASSESSING OFFICER OF RS. 14,533.00 OUT OF TELEPHONE EXPENSES. 5 . THAT THE LEARNED CIT ( A PPEALS) HAS ERRED IN CONFIRMING THE AD - HOC DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS. 18,697.00 OUT OF STAFF WELFARE EXPENSES. 6 . THAT THE LEARNED C IT ( A PPEALS) HAS ERRED IN CONFIRMING THE AD - HOC DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS. 15,730.00 OUT OF VAT DEMAND FOR 2010 - 11. 7 . THAT THE ADDITION / DISALLOWANCES CONFIRMED BY CIT ( A PPEALS) AND MADE BY THE ASSESSING OFFICER ARE HIGHLY EXCESSIVE AN D ARBITRARY. 8 . THAT THE LEARNED CIT ( A PPEALS) HAS ERRED IN NOT PROVIDING PROPER AND ADEQUATE OPPORTUNITY TO THE APPELLANT. 9 . THAT THE APPELLANT CRAVES THE RIGHT TO INTRODUCE OR WITHDRAW ANY GROUND OF APPEAL WITH YOUR KIND PERMISSION. 2 . THE FACTS ARE THAT THE ASS ESSEE IS RUNNING A PROPRIETORSHIP CONCERN AND IS ENGAGED IN THE BUSINESS OF TRADING OF JEWELLERY. DURING THE RELEVANT YEAR RETURN WAS E - FILED DECLARING TOTAL INCOME OF RS.17,78,620/ - . LATER ON THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND ACCORDING LY STATUTORY NOTICES WERE ISSUED ON THE ASSESSEE AND DULY SERVED ALONG WITH DETAILED QUESTIONNAIRE. IN COMPLIANCE TO THESE NOTICES, LD. A.R. OF THE ASSESSEE ATTENDED FROM TIME TO TIME AND FURNISHED REQUIRED DETAILS AND EXPLANATIONS WHICH WERE EXAMINED BY THE ITA NO.813/LKW/2017 PAGE 3 OF 7 ASSESSING OFFICER. ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ASSESSING THE INCOME OF THE ASSESSEE AT RS.27,41,050/ - . 3 . WITH REGARD TO GROUND NO.1 RELATING TO PAYMENT OF COMMISSION, THE ASSESSING OFFICER HAS TAKEN THE FOL LOWING GROUNDS FO R DISALLOWANCE: - ( 1 ) COMMISSION PAID TO RAJESH MISHRA IS NOT GE NUINE. HE IS PAID SALARY OF RS. 3000/ - PER MONTH. SURPRISING THAT AN EMPLOYEE EARNING SALARY OF 36000/ - P ER ANNUM IS ABLE TO BE GIVEN COMMISSION OF RS. 4 LA KHS @ 5% ON SALE MADE THROUGH HIM. NO DETA ILS OF ANY CUSTOMER TO WHOM SALES WERE MADE THOUGH HIM. NO CONFIRMATION LETTER FROM CUSTOMERS TO SHOW THAT SALES TO HIM ARE MADE THOUGH RAJESH MISHRA , WAS FILED BY THE ASSESSEE . ( 2 ) PAYMENT OF COMMISSION TO SHRI HARI KISHAN AWASTHI AND SHRI VINOD SHUKLA , NO DE TAILS OF DEALERS TO WHOM SALES MADE THROUGH THEM WERE FILED AND NO CONFIRMATION FROM DEALERS WERE PRODUCED BEFORE THE ASSESSING OFFICER . AS SESSE E WAS UNABLE TO SUBSTANTIATE CLAIM WITH REGARD TO SERVICE PROVIDED BY THESE COMMISSION AGENTS. 4 . DURING THE COURSE OF ASSESSMENT PROCEEDING S, IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT SHRI PRADEEP JAIN , HUSBAND OF THE ASSESSEE IS ENGAGED IN THE DAY TO DAY AFFAIRS OF BUSINESSES . C OMPLETE ADDRESS ALONG WITH PAN WAS FURNISHED BEFORE THE ASSESSING OFFICER FOR MAK ING ANY TYPE OF ENQUIRY TO ASCERTAIN THE NATURE OF SERVICES RENDERED BY THE COMMISSION AGENTS. 5 . SIMILARLY, BEFORE THE LD. CIT(A) ASSESSEE HAS FILED A DETAILED WRITTEN SUBMISSION. LD. CIT(A) AFTER CONSIDERING THE ASSESSMENT ORDER, ITA NO.813/LKW/2017 PAGE 4 OF 7 SUBMISSIONS OF THE ASSESS EE AND THE FACTS OF THE CASE , CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER. FROM A PERUSAL OF THE REMAND REPORT , IT IS NOTICED THAT SUMMONS UNDER SECTION 131 W ERE ISSUED AND IT WAS RETURNED BACK BY THE POSTAL AUTHORITIES WITH THE REMARK LEFT/UNKNO WN. LD. CIT(A) HAS UPHELD THE ADDITION ON THE GROUND THAT PAYMENT OF COMMISSION HAS REMAINED UNVERIFIED AND ALSO THE NATURE OF SERVICE OF SUMMONS ISSUED UNDER SECTION 131 OF THE ACT TO THE COMMISSION AGENTS ALLEGEDLY RENDERED THEM ALSO REMAINED UNVERIFIE D. 6 . LD. A.R. OF THE ASSESSEE , AT THE TIME OF HEARING BEFORE US RELIED UPON THE JUDICIAL PRONOUNCEMENTS OF THE TRIBUNAL IN THE CASE OF PHOOL SINGH VS. ACIT IN ITA NO.2901/DEL/2014 AND ITO VS. UMRAO SINGH, HUF IN ITA NO.4578/DEL/2012 AND VEHEMENTLY ARGUED THA T SINCE THEY HAVE SUPPLIED ALL THE DETAILS SUCH AS ADDRESS AND PAN NUMBER OF THE COMMISSION AGENTS AND JUST BECAUSE OF THE REASON THAT SUMMONS UNDER SECTION 131 OF THE ACT ISSUED TO THEM WAS RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARK LEFT/UNKNOWN OR THE SUMMONS UNDER SECTION 131 WAS NOT COMPLIED WITH, NO ADDITION CAN BE MADE. LD. A.R. OF THE ASSESSEE FURTHER SUBMITTED THAT IN THE CASE OF J.K. WOOLLEN MANUFACTURE VS. CIT [1969] 721 T.R. 612 (SC), IT WAS HELD BY THE HON'BLE APEX COURT THAT IN APPLY ING THE TEST OF COMMERCIAL EXPEDIENCY FOR DETERMINING WHETHER AN EXPENDITURE WAS WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF ASSESSEES BUSINESS, REASONABLENESS OF THE EXPENDITURE HAS TO BE JUDGED FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT OF THE INCOME TAX DEPARTMENT. LD. A.R. OF THE ASSESSEE SUBMITTED THAT IN THE NORMAL COURSE OF BUSINESS, IN WHICH ASSESSEE WAS ENGAGED, PAYMENT OF COMMISSION WAS ESSENTIAL TO BOOST UP THE SALES AND SALARY OF THE SELLING AGENTS WERE KEPT AT LOWER SCALE , SINCE COMMISSION WAS ALSO PAID TO THEM FOR EXECUTING COUNTER SALES. ITA NO.813/LKW/2017 PAGE 5 OF 7 7 . LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 8 . WE HAVE PERUSED THE CASE RECORDS, ANALYSED THE FACTS OF THE CASE AND FROM A PERUSAL OF THE REMAND REPORT, WE FIND THA T THE ASSESSING OFFICER HAS ISSUED SUMMONS UNDER SECTION 131 OF THE ACT BUT THERE WAS NO COMPLIANCE AND IT WAS RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARK LEFT/UNKNOWN. IN THIS CONTEXT , LD. CIT(A) HAS UPHELD THE ADDITION MADE BY THE ASSESSING OFF ICER. THE FACTS ON RECORD SUGGEST THAT DURING THE ASSESSMENT PROCEEDINGS ASSESSEE HAS FILED DETAILS OF PURCHASES AND SALES MADE DURING THE YEAR UNDER CONSIDERATION GIVING NAME, ADDRESS, PAN AND COMMISSION PAID TO THE COMMISSION AGENT. TDS HAS BEEN DEDUCT ED, HOWEVER, THE REMAND REPORT IS SILENT ABOUT THE GENUINENESS OF THESE FACTS AND WHETHER THESE FACTS WERE VERIFIED. WE ALSO OBSERVE THAT IN THE ASSESSMENT ORDER, ASSESSING OFFICER HAS DOUBTED GENUINENESS REGARDING PAYMENT OF COMMISSION BECAUSE THE SALES PERSON WHO IS EARNING SALARY OF RS.36,000/ - PER ANNUM IS BEING GIVEN COMMISSION OF RS.4 LAKHS @ 5% ON SALE MADE THROUGH HIM. ASSESSEE HAS NEITHER FILED ANY DETAIL S OF CUSTOMER S TO WHOM SALES WERE MADE NOR ANY CONFIRMATION WAS FOUND. DURING THE REMAND PRO CEEDINGS , ASSESSING OFFICER SHOULD HAVE ENQUIRED ON ALL THESE ASPECTS AND VERIFIED THE FACTS ONCE AGAIN AND WITHOUT NECESSITATING ON SUCH EXERCISE , HE HAS SIMPLY ISSUED SUMMON UNDER SECTION 131 AND BECAUSE OF NON - COMPLIANCE AND ON ACCOUNT OF RETURN OF SUCH SUMMON BY THE POSTAL AUTHORITIES WITH THE REMARK LEFT/UNKNOWN , HE HELD ENTIRE COMMISSION PAYMENT TO BE AS NON - GENUINE. BOTH THE ASSESSING OFFICER AND THE LD. CIT(A) SHOULD HAVE DEALT WITH ALL THESE FACTUAL ASPECTS AND SPECIALLY THE ASSESSING OFFICER WH ILE PREPARING REMAND REPORT SHOULD HAVE VERIFIED THE GENUINENESS OF THE FACTS OF TRANSACTION AS APPEARING ON RECORD AND SHOULD HAVE THEN COME TO A CONCLUSIVE FINDING . WE FIND THAT THIS ENTIRE ITA NO.813/LKW/2017 PAGE 6 OF 7 EXERCISE IS MISSING AND, THEREFORE, WE SET ASIDE THE ORDER OF T HE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO HIS FILE TO ADJUDICATE THE SAME AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE , AS DIRECTED HEREINABOVE . TH U S GROUND NO.1 IS ALLOWED FOR STATISTICAL PURPOSES. 9 . GROUNDS NO. 2 TO 6 ARE TAKEN TOGETHER. AT THE APPELLATE STAGE , LD. CIT(A) HAD ASKED THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT AND VOUCHERS SO THAT VERIFICATION AND RE - ESTIMATION OF DISALLOWANCE OF STAFF WELFARE AND TRAVELLING EXPENSES CAN BE MADE. THIS VERIFICATION MI GHT RESULT IN DEDUCTION OF DISALLOWANCE OR ENHANCEMENT OF DISALLOWANCE DEPENDING UPON THE NATURE OF VOUCHERS AND THEIR VERIFIABILITY. ASSESSEE DID NOT PRODUCE ANY BOOKS OF ACCOUNT AND VOUCHERS FOR VERIFICATION BEFORE THE LD. CIT(A). IN THE ABSENCE OF PRO DUCTION OF BOOKS OF ACCOUNT AND VOUCHERS, LD. CIT(A) OBSERVED THAT IT WAS NOT POSSIBLE FOR HIM TO DEVIATE FROM THE STAND TAKEN BY THE ASSESSING OFFICER. LD. CIT(A) FURTHER HELD THAT ASSESSEE DOES NOT HAVE A PERSONAL C AR AND IN FACT IT HAS NOT BEEN ESTABLI SHED HOW HIS CHILDREN AND PARENTS TRAVELLED WITHOUT VEHICLE. SINCE IT IS NOT ESTABLISHED THAT THEY HAVE PERSONAL VEHICLE, LD. CIT(A) RULED THAT THERE HAS TO BE SOME ELEMENT OF PERSONAL USE ALSO. ASSESSEE HAS NOT PRODUCED LEDGERS FOR VARIOUS EXPENSES, STO CK DETAILS RECORD, CALL REGISTERS OR LOG BOOK AND PERSONAL USAGE REGISTER FOR CAR. 10 . WE HAVE PERUSED THE CASE RECORDS, ANALYSED THE FACTS OF THE CASE AND WITH REGARD TO DISALLOWANCES MADE ON THESE GROUNDS OF APPEAL, WE NOTICE THAT NO DOCUMENTARY EVIDENCE IN CLUDING BOOKS OF ACCOUNT WERE FILED BEFORE THE APPELLATE AUTHORITY. ASSESSEE HAS ALSO NOT FURNISHED ANY EXPENSE LEDGERS NOR ASCERTAINED VERIFIABILITY OF THE EXPENSES MADE. IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO HIS FILE TO PROVIDE AN ITA NO.813/LKW/2017 PAGE 7 OF 7 OPPORTUNITY TO THE ASSESSEE TO PRODUCE BEFORE THE LD. CIT(A) RELEVANT DOCUMENTARY EVIDENCE RELATING TO THESE EXPENSES AND AFTER CONSIDERING THEM, LD. CIT(A) WILL PASS A SPEAKING ORDER AFTER PROVIDING AN OPP ORTUNITY OF HEARING TO THE ASSESSEE. ACCORDINGLY GROUNDS NO. 2 TO 6 ARE ALSO RESTORED BACK TO THE FILE OF THE LD. CIT(A). 11 . GROUNDS NO.7, 8 & 9 ARE GENERAL IN NATURE AND NO ADJUDICATION IS REQUIRED. 12 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10 / 0 8 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10 TH AUGUST , 201 8 JJ: 0608 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR