The DCIT. Circle-7, Ahmedabad V. M/s. Siddhi Corporation, Ahmedabad

ITA 814/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0190 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 28-07-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 04-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Assessee Lawyers: M J SHAH
• Keywords: Additional evidence
• Section: 131; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. N. PAHUJA, AM) ITA NO.814/AHD/2008 A. Y.: 2001-02 THE A. C. I. T., CIRCLE-7, 2 ND FLOOR, NAVJEEVAN TRUST BUILDING, OFF. ASHRAM ROAD, AHMEDABAD VS M/S. SIDDHI CORPORATION, A-138, SOMESHWAR COMPLEX, SATELLITE ROAD, AHMEDABAD PA NO. AADFS 2667 Q (APPELLANT) (RESPONDENT) APPELLANT BY SHRI K. M. MAHESH, DR RESPONDENT BY SHRI M. J. SHAH, AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-XI, AHMEDABAD DATED 26-12-2007 FOR ASSESSMENT YEAR 2001-02, CHALLENGING THE DELETION O F ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF COMMISSION EXPENSES OF R S.13,10,000/- 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH THE P ARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERE D THE MATERIAL ON RECORD POINTED OUT BY THE PARTIES. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT DURING THE PROCEEDINGS U/S 263 OF THE IT ACT BEFORE THE LEARNED COMMISSIONER T HE ASSESSEE HAD FURNISHED CERTAIN EVIDENCES TO JUSTIFY THE CLAIM OF PAYMENT OF THE COMMISSION OUT OF COMMISSION RECEIVED WITH RESPECT TO SUPPLY OF PRE- FABRICATED CLASS ROOMS TO THE DIRECTOR OF PRIMARY E DUCATION, GANDHINAGAR. THE LEARNED COMMISSIONER DIRECTED THE AO TO FINALIZE THE ASSESSMENT AFTER EXAMINING THE EVIDENCES OF SERVICE S RENDERED BY M/S. HARIOM SURJAK AND M/S. HARIOM ASSOCIATES AND DISALL OW THE COMMISSION PAID TO M/S. RENUAL & CO. AND M/S. PANCHAM PLYWOOD PVT. LTD. AND M/S. JAIPUR MARKETING, IF THE ASSESSEE FAILS PRODUC ED ANY EVIDENCES TO PROVE ITA NO.814/AHD/2008 CIT, CIR-7, AHMEDABAD VS M/S. SIDDHI CORPORATION 2 THAT THEY HAD RENDERED ANY SERVICES EITHER TO THE A SSESSEE OR TO M/S. SINTEX INDUSTRIES LTD. THE ASSESSEE WAS ASKED TO PR ODUCE EVIDENCE AT THE ASSESSMENT STAGE TO PROVE THE SERVICES RENDERED BY THE ABOVE 5 PARTIES WITH RESPECT TO SUPPLY OF PREFABRICATED CLASS ROOMS TO THE DIRECTOR OF PRIMARY EDUCATION, GANDHINAGAR. THE AO CONSIDERING THE SUBMISSION OF THE ASSESSEE NOTED THAT THE ASSESSEE COULD NOT FURN ISH ANY ADDITIONAL EVIDENCE TO PROVE THAT COMMISSION PAID TO M/S. RENU AL & CO., M/S. PANCHAM PLYWOOD PVT. LTD. AND M/S. JAIPUR MARKETING WERE ON ACCOUNT OF SERVICES RENDERED EITHER TO THE ASSESSEE OR TO M /S. SINTEX INDUSTRIES. THE AO ACCORDINGLY, DISALLOWED THE COMMISSION PAYME NT OF RS.14.34 LACS, IN RESPECT OF M/S. RENUAL & CO., RS.10.00 LAC S, IN RESPECT OF M/S. PANCHAM PLYWOOD PVT. LTD. AND RS.3.10 LACS, IN RESP ECT OF JAIPUR MARKETING RS.1.24 LACS. THE LEARNED CIT(A) CONFIRME D THE ADDITION AS REGARDS M/S. JAIPUR MARKETING. HOWEVER, THE ADDITIO N WITH RESPECT TO M/S. RENUAL & CO. AND M/S. PANCHAM PLYWOOD PVT. LTD . IN A SUM OF RS.10.00 LACS AND RS.3.10 LACS (RS.13.10 LACS) WERE DELETED. THE REVENUE IS IN APPEAL CHALLENGING THE DELETION OF ADDITION O F RS.13.10 LACS IN RESPECT OF THE ABOVE TWO PARTIES. IT WAS BRIEFLY SU BMITTED BEFORE THE LEARNED CIT(A) THAT THE ASSESSEE FILED COPIES OF TH E CREDIT NOTES AND OTHER DOCUMENTS AND EVIDENCES TO SHOW THAT PAYMENTS HAVE BEEN MADE TO THE ABOVE PARTIES ON BEHALF OF M/S. SINTEX INDUSTRIES L TD. THE ASSESSEE FURNISHED NAME AND ADDRESS OF THE PARTIES, COMMISSI ON ACCOUNT, RATE OF COMMISSION, LETTER FROM M/S. SINTEX INDUSTRIES LTD. , PURPOSE FOR WHICH COMMISSION HAS BEEN PAID AND ORDER NUMBER FOR WHICH COMMISSION WAS PAID. IT WAS SUBMITTED THAT ALL THE PARTIES WERE HE LPING M/S. SINTEX INDUSTRIES LTD. IN PROPER EXECUTION OF THE WORK ORD ER AND THAT THEY WERE INVOLVED IN ARRANGING SITE VISITS, SURVEY AND INSPE CTION OF THE SITES AND ALSO HELPED M/S. SINTEX INDUSTRIES LTD. IN SECURING TIMELY PAYMENT. M/S. SINTEX INDUSTRIES LTD. ALSO CONFIRMED THIS FACT IN ITS LETTER DATED 09-03-2005. IT WAS EXPLAINED THAT THE ABOVE PAYMENT S WERE MADE TO BOTH THE PARTIES FOR THE WORK NOT PERTAINING TO THE ASSESSEE BUT IN FACT IT ITA NO.814/AHD/2008 CIT, CIR-7, AHMEDABAD VS M/S. SIDDHI CORPORATION 3 WAS REIMBURSEMENT OF THE AMOUNT WHICH HAS BEEN RECE IVED BY THE ASSESSEE FROM M/S. SINTEX INDUSTRIES LTD. WHICH HAS BEEN PASSED ON TO BOTH THE PARTIES FOR THE WORK DONE ON BEHALF OF M/S . SINTEX INDUSTRIES LTD. IT WAS SUBMITTED THAT THE CONTENTION OF THE AS SESSEE WAS SUPPORTED BY EVIDENCES AND MATERIALS. THEREFORE, THE AO WAS N OT JUSTIFIED IN DISALLOWING THE SAME. THE LEARNED CIT(A) CONSIDERIN G THE EXPLANATION OF THE ASSESSEE AND MATERIAL ON RECORD DELETED THE ADD ITION OF RS.13.10 LACS. HIS FINDINGS ARE REPRODUCED AS UNDER: 4.1.2. THE SUBMISSIONS OF THE A. R. OF THE APPELLA NT HAVE BEEN PERUSED. THE DETAILS PRODUCED BEFORE ME B Y THE A. R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAVE ALSO BEEN EXAM INED. 4.1.3 IT MAY BE SEEN THAT THE SINTEX INDUSTRIES LT D. HAD DONE PRE-FABRICATED CLASS ROOMS AS PER THE ORDERS O F GUJARAT GOVERNMENT. SINTEX INDUSTRIES LTD., HAD CONFIRMED T HAT PANCHAM PLY WOOD (P) LTD. AND RENUAL & CO. HAD DONE LIAISONING WORK FOR WHICH CERTAIN COMMISSION HAD BE EN PAID TO THEM THROUGH THE APPELLANT. APPELLANT IS STATED TO HAVE RECEIVED THE SAID COMMISSION AND PASSED ON TO THE A BOVE PARTIES AS PER THE INSTRUCTIONS OF SINTEX INDUSTRIE S LTD. 4.1.4. FURTHER, IT IS SEEN THAT THE APPELLANT ALSO MADE A CLAIM TO HAVE PAID COMMISSION TO JAIPUR MARKETING. HOWEVER, THIS IS NOT CONFIRMED BY THE SYNTEX INDUSTRIES LTD. THEREFORE, IT APPEARS THAT RS.1,20,000/- CLAIMED BY THE APPELLANT FOR HAVING PAID COMMISSION TO JAIPUR MARKETING IS NOT A CCEPTABLE. HENCE, THIS ALLEGED COMMISSION PAYMENT CLAIMED AS A DEDUCTION WHICH IS DISALLOWED BY THE A. O. IS CONFI RMED. 4.1.5. AS DISCUSSED ABOVE SINTEX INDUSTRIES LTD. H AS CONFIRMED WITH REGARD TO SERVICES RENDERED TO THEM BY RENUAL & CO. AND PANCHAM PLYWOOD (P) LTD. AND THE DEDUCTIO NS CLAIMED TOWARDS THEM AS A COMMISSION AT RS.10,00,00 0/- AND RS.3,10,000/- RESPECTIVELY IS REQUIRED TO BE AL LOWED. HENCE, THE APPELLANT GETS RELIEF TO THIS EXTEND. 3. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND SUBMITTED THAT THE ASSESSEE HAD NOT FURNISHED ANY EVIDENCE AS TO W HICH SERVICES HAVE BEEN RENDERED BY M/S. RENUAL & CO. AND M/S. PANCHAM PLYWOOD ITA NO.814/AHD/2008 CIT, CIR-7, AHMEDABAD VS M/S. SIDDHI CORPORATION 4 INDUSTRIES PVT. LTD. TO THE ASSESSEE. THE LEARNED D R SUBMITTED THAT IN THE ABSENCE OF ANY EVIDENCE OF SERVICES RENDERED BY THE AFORESAID PARTIES TO THE ASSESSEE, THE LEARNED CIT(A) WAS NOT JUSTIFI ED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF COMMISSION PA YMENT. THE LEARNED DR REFERRED TO THE BANK STATEMENTS OF THE P ARTIES IN THE PAPER BOOK AND POINTED OUT THAT WHEN THE ASSESSEE MADE PA YMENTS TO BOTH THE PARTIES THROUGH CHEQUES, THEY HAVE IMMEDIATELY WITH DRAWN THE CASH. THEREFORE, THERE WAS A DOUBT IN THE CASE OF THE ASS ESSEE REGARDING GENUINE PAYMENT. THE LEARNED DR FURTHER SUBMITTED T HAT THE PROFIT & LOSS ACCOUNT AND BALANCE SHEET OF THE ASSESSEE IS N OT PROPER BECAUSE THE ASSESSEE SHOULD HAVE SHOWN THE COMMISSION INCOME RE CEIVED FROM M/S. SINTEX INDUSTRIES LTD. IN THE PROFIT & LOSS ACCOUN T AND THEN COMMISSION PAID SHOULD HAVE BEEN DEBITED TO THE EXPENDITURE. B UT THE ASSESSEE HAS SHOWN THE NET OF THE COMMISSION INCOME IN THE TRADI NG AND PROFIT & LOSS ACCOUNTS WHICH ITSELF CASTE DOUBT IN THE EXPLANATIO N OF THE ASSESSEE. THE LEARNED DR, THEREFORE, SUBMITTED THAT THE ADDITION MAY BE CONFIRMED BY SETTING ASIDE THE ORDER OF THE LEARNED CIT(A). 4. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW A ND SUBMITTED THAT IN FACT THE PAYMENTS TO M/S. RENUAL & CO. AND M/S. PAN CHAM PLYWOOD PVT. LTD. ARE NOT PERTAINING TO ANY SERVICES RENDERED BY THEM TO THE ASSESSEE, BUT IT WAS REIMBURSEMENT OF THE AMOUNT WHICH HAS BE EN RECEIVED BY THE ASSESSEE FROM M/S. SINTEX INDUSTRIES LTD. WHICH HAS BEEN PASSED ON TO THEM. HE HAS SUBMITTED THAT SIMILAR FACT IS MENTION ED IN THE CREDIT NOTES ISSUED TO THE ABOVE PARTIES (PB - 19 AND PB -25) IN WHICH IT IS CLEARLY MENTIONED THAT IT IS PERTAINING TO TECHNICAL ASSIST ANCE GIVEN TO M/S. SINTEX INDUSTRIES LTD. PERTAINING TO ORDER OF PREFA BRICATED CLASS ROOMS. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT M/S. SINTEX INDUSTRIES LTD. DIRECTLY EXPLAINED THE ISSUE TO THE REVENUE DEPARTMENT BY FILING THE CONFIRMATION IN RESPONSE T O SUMMONS U/S 131 ITA NO.814/AHD/2008 CIT, CIR-7, AHMEDABAD VS M/S. SIDDHI CORPORATION 5 OF THE IT ACT EXPLAINING THEREIN THAT PAYMENTS HAVE BEEN MADE BY THE ASSESSEE TO THE ABOVE PARTIES ON THEIR BEHALF. IN R ESPECT OF THE NATURE OF SERVICES PROVIDED BY BOTH THE PARTIES IN ITS PROJEC T EXECUTION OF THE WORK OF SCHOOL ROOMS, HE HAS SUBMITTED THAT SINCE THE AS SESSEE WAS ONLY COORDINATOR BETWEEN M/S. SINTEX INDUSTRIES LTD. AND THE ABOVE PARTIES AND THE AMOUNTS WERE PAID ONLY THROUGH THE ASSESSEE , THEREFORE, THE NET OF THE COMMISSION WAS RIGHTLY SHOWN IN THE PROFIT & LOSS ACCOUNT. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THA T PAYMENTS WERE MADE THROUGH CHEQUES AND DETAILS OF PA NUMBER OF TH E PARTIES WERE FILED. NO EVIDENCE HAS BEEN BROUGHT ON RECORD IF THE MONEY WITHDRAWN BY THE PARTIES WAS DIVERTED BACK TO THE ASSESSEE. THE LEAR NED COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT THE LEARNED CIT (A) RIGHTLY DELETED THE ADDITION. HE HAS RELIED UPON THE DECISION OF THE HO NBLE GUJARAT HIGH COURT IN THE CASE OF SWASTIK TEXTILE CO. PVT. LTD. VS CIT 150 ITR 155. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL AVAILABLE ON RECORD AND DO NOT FIND ANY JUSTIFICATION TO INTE RFERE WITH THE FINDING OF THE LEARNED CIT(A) IN DELETING THE ADDITION. THE AO NOTED IN THE ASSESSMENT ORDER THAT THE LEARNED COMMISSIONER EXER CISING HIS POWER U/S 263 OF THE IT ACT DIRECTED THE AO TO ASK FOR TH E EVIDENCES TO PROVE IF COMMISSION PAID TO M/S. RENUAL & CO. AND M/S. PANC HAM PLYWOOD PVT. LTD. WAS IN RESPECT OF SERVICES RENDERED EITHER TO THE ASSESSEE OR TO M/S. SINTEX INDUSTRIES LTD. IT IS, THEREFORE, CLEAR THA T SCOPE OF ENQUIRY WAS TO VERIFY WHETHER THE SERVICES WERE RENDERED FOR THE A SSESSEE OR FOR M/S. SINTEX INDUSTRIES LTD. THE ASSESSEE EXPLAINED BEFOR E THE AUTHORITIES BELOW THAT IT IS A COORDINATOR BETWEEN M/S. SINTEX INDUSTRIES LTD. AND M/S. RENUAL & CO. AND M/S. PANCHAM PLYWOOD PVT. LTD . IN FACT, THE SERVICES WERE RENDERED BY THE ABOVE PARTIES FOR THE WORK OF M/S. SINTEX INDUSTRIES LTD. AND THAT THE ASSESSEE RECEIVED THE ENTIRE AMOUNT OF COMMISSION WHICH WAS PASSED ON TO THE AFORESAID PA RTIES THROUGH IT. IN FACT, THE ASSESSEE REIMBURSED THE AMOUNT TO BOTH TH E PARTIES ON BEHALF OF ITA NO.814/AHD/2008 CIT, CIR-7, AHMEDABAD VS M/S. SIDDHI CORPORATION 6 M/S. SINTEX INDUSTRIES LTD. CONFIRMATION OF M/S. SI NTEX INDUSTRIES LTD. WAS FILED DIRECTLY TO THE REVENUE AUTHORITIES IN WH ICH IT WAS CONFIRMED BY THEM THAT M/S. PANCHAM PLYWOOD PVT. LTD. AND M/S. R ENUAL & CO. HAVE PROVIDED SERVICES FOR THEIR PROJECT THROUGH THE ASS ESSEE. THE NATURE OF WORK ASSIGNED TO THEM IS ALSO MENTIONED FOR WHICH P AYMENTS HAVE BEEN MADE. SIMILAR FACT IS MENTIONED IN THE CREDIT NOTE ISSUED TO BOTH THE PARTIES IN WHICH IT WAS CLARIFIED THAT COMMISSION I S CREDITED IN THEIR ACCOUNTS FOR PROVIDING TECHNICAL ASSISTANCE AGAINST M/S. SINTEXT INDUSTRIES LTD. FOR ORDER OF PREFABRICATED SCHOOL R OOMS. IT IS, THEREFORE, CLEAR THAT THE ASSESSEE WAS ONLY A MEDIATOR FOR THE PURPOSE OF MAKING REIMBURSEMENT OF CLAIM ON BEHALF OF M/S. SINTEX IND USTRIES LTD. THE ASSESSEE HAS RECEIVED TOTAL COMMISSION AMOUNT IN TH IS REGARD OF RS.61,10,909/- AND AFTER MAKING PAYMENTS ON BEHALF OF M/S. SINTEX INDUSTRIES LTD. BALANCE OF RS.17,909/- WAS LEFT TO THE ASSESSEE IN THE COMMISSION ACCOUNT WHICH IS CREDITED IN THE PROFIT & LOSS ACCOUNT AS INCOME. DUE TO THE ABOVE FACT, THE ASSESSEE DID NOT CLAIM DEDUCTION ON ACCOUNT OF COMMISSION PAYMENT IN THE PROFIT & LOSS ACCOUNT. THE ABOVE FACTS, THEREFORE, SUPPORT THE CONTENTION OF THE ASS ESSEE THAT THE ABOVE PARTIES RENDERED THE SERVICES TO M/S. SINTEX INDUST RIES LTD. THOROUGH THE ASSESSEE. HONBLE GUJARAT HIGH COURT IN THE CASE OF SWASTIK TEXTILE CO. LTD. (SUPRA) HELD, THAT THE STATEMENT OF N THAT HE HAD BROUGHT THE TWO PARTIES TOGETHER HAD REMAINED UNCONTROVERTED BY THE REVENUE. THE ASSERTION OF A MILLS THAT N WAS ASSOCIATED WITH THE TRANSACTIONS ALSO REMAINED UNCONTROVERTED. AS A RESULT, IT WOULD BE DIFFICULT TO CONCLUDE THAT NO SERVICES HAD BEEN REN DERED BY N TO THE ASSESSEE. THE FINDING OF FACT BY THE TRIBUNAL WAS C LEARLY UNREASONABLE. THE ASSESSEE WAS, THEREFORE, ENTITLED TO THE DEDUCTION OF RS.14,250 PAID BY WAY OF COMMISSION TO N. 5.1 THE PAYMENTS WERE MADE THROUGH CHEQUES. COPY OF THE PA NUMBERS IS ALSO FILED. THE ABOVE FACTS, THEREFORE, WOULD SHOW THAT ITA NO.814/AHD/2008 CIT, CIR-7, AHMEDABAD VS M/S. SIDDHI CORPORATION 7 ADDITION MADE BY THE AO WAS CLEARLY UNJUSTIFIED. TH E LEARNED DR CONTENDED THAT THERE WAS WITHDRAWAL OF MONEY BY BOT H THE PARTIES FROM THEIR BANK ACCOUNTS. BUT, NO EVIDENCE IS BROUGHT ON RECORD THAT THE MONEY SO WITHDRAWN BY THE PARTIES WAS GIVEN BACK TO THE ASSESSEE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND IT TO BE A FIT CASE FOR INTERFERENCE. WE ACCORDINGLY, CONFIRM THE FINDI NGS OF THE LEARNED CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 6. AS A RESULT, THE DEPARTMENTAL APPEAL IS DISMISS ED. ORDER PRONOUNCED ON 06-08-2010. SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 06-0 8-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD