M/S IFF HILSON PRIVATE LIMITED, Indore V. THE DCIT 5(1), Indore

ITA 924/IND/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2357 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 06-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business expenditure
• Section: 143(3); 37(1); 27

Judgement Text

IFF HILSON PRIVATE LIMITED 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.924/IND/2016 ASSESSMENT YEAR: 2009-10 ORDER PER MANISH BORAD, AM. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-1, INDORE [IN SHORT REFERRED TO AS THE CIT (A)] DATED 04.07.2016 ARISING OUT OF THE ORDER U/S 271(1)(C) OF THE INCOME TAX ACT DATED 25.3.2015 FRA MED BY THE DCIT, CIRCLE 5(1), INDORE PERTAINING TO ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUND OF APPE AL. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED I CONFIRMING THE PENALTY OF RS.600000 IMPOSED BY THE LD.A.O U/S 271(1)(C) OF THE ACT IGNORING THE FACTS ON RECORD THAT APPELLANT HAS DIS CHARGED INITIAL BURDEN OF IFF HILSON PRIVATE LIMITED, RING ROAD SQUARE, MUSAKHEDI, INDORE VS. DY. COMMISSIONER OF INCOME CIRCLE 5(1), INDORE (APPELLANT) (RE SPONDENT ) PAN NO.AABCT1651P RESPONDENT BY SHRI K.G. GOYAL, SR. DR APPELLANT BY SHRI ANIL K. KHANDELWAL, CA (AR) DATE OF HEARING: 08.01.2018 DATE OF PRONOUNCEMENT: 12.01.2018 IFF HILSON PRIVATE LIMITED 2 PROVING THE EXPENSES MADE BASED ON THE COPIES OF IT R AND OTHER DETAILS OF RECIPIENTS 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A LIMITED COMPANY ENGAGED IN THE MANUFACTURING AND TRADING OF M.S. & S.S. CAGES AND ACCESSORIES. THE ASSESSMENT U/S 143(3) O F THE INCOME TAX ACT WAS COMPLETED ON 30.12.2011 ASSESSING INCOM E AT RS.1,33,79,066/- AS AGAINST THE INCOME SHOWN IN THE RETURN OF INCOME AT RS.63,55,860/-. THE ASSESSEE WENT IN APP EAL BEFORE THE LD. CIT(A) AGAINST THE ADDITION MADE BY THE ASSESSI NG OFFICER AND PARTLY SUCCEEDED AND IN FURTHER APPEAL BEFORE THE T RIBUNAL, ASSESSEE ALSO PARTLY SUCCEEDED. 4. SUBSEQUENTLY, PENALTY PROCEEDINGS U/S 271(1)(C) WERE CARRIED OUT AND PENALTY OF RS.6,00,000/- WAS IMPOSED ON THE ADDITION TOWARDS DISALLOWANCE OF COMMISSION EXPENSES OF RS.1 6,44,000/- WHICH WAS CONFIRMED BY THE TRIBUNAL ALSO. THIS PEN ALTY WAS LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME AS THE ASSESSEE WAS UNABLE TO PROVE THE GENUINENESS OF THE COMMISSION E XPENSES BECAUSE FOR THE VERY SAME WORK THE ASSESSEE HAD PAI D COMMISSION OF RS.50,69,022/- TO M/S. INDUSTRIAL FILTER & FABRI CATIONS PVT. LTD, WHICH IS THE SISTER CONCERN OF THE ASSESSEE. THE A SSESSEE APPEALED AGAINST THE IMPUGNED PENALTY BEFORE THE CIT(A) BUT WENT IN VEIN AND FILED APPEAL BEFORE THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL NECESSARY EVIDENCES IN THE FORM OF NAME, ADDRESSES, PERMANENT ACCOUNT NUMBER, CONFIRMATION OF ACCOUNT AND AGREEMENT MADE FOR CARRYING OUT THE WORK WERE PRODUCED BEFORE THE LOWER AUTHORI TIES AND THEIR IFF HILSON PRIVATE LIMITED 3 CORRECTNESS HAS NOT BEEN DOUBTED BY THE LOWER AUTHO RITIES, THEREFORE NO PENALTY SHOULD HAVE BEEN LEVIED U/S 27 1(1)(C) OF THE INCOME TAX ACT. ON THE OTHER HAND THE LD. DR VEHE MENTLY AGRUED SUPPORTING THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE ARGUMENTS AND SUBMISSIONS MADE BEFORE US AND THE SOLE GRIEVANCE OF THE ASSESSEE IS AGAINS T THE ORDER OF LD.CIT(A) IN CONFIRMING PENALTY OF RS.6,00,000/- IM POSED BY THE LD.A.O ON THE ADDITION TOWARDS DISALLOWANCE OF COMM ISSION EXPENSES OF RS.16,44,000/-. WE OBSERVE THAT IN THE QUANTUM APPEAL, ASSESSEE FAILED TO SUCCEED BEFORE THE TRIBU NAL AND THE DISALLOWANCES OF COMMISSION EXPENSES OF RS.16,44,00 0/- WAS CONFIRMED BY THE TRIBUNAL OBSERVING AS FOLLOWS; HOWEVER, COMING TO THE SECOND COMPONENT OF COMMISS ION, DISALLOWED BY ASSESSING OFFICER AS DISCUSSED IN DETAIL ABOVE AT R S.16.44 LACS, THE APPELLANT DESPITE SUFFICIENT OPPORTUNITIES GIVEN CO ULD NOT ESTABLISH THE ADMISSIBILITY OF COMMISSION PAYMENT PAID TO INDIVID UALS OVER AND ABOVE THE INCREASED COMMISSION PAID TO IFFL ON THE ENTIRE TURN OVER WHICH AMOUNTED TO SUBSTANTIAL AMOUNT OF RS.50.69 LACS. T HE APPELLANT IN HIS WRITTEN SUBMISSION HAS EMPHASIZED IN SUPPORT OF INC REASED COMMISSION PAID TO IFFL, THAT THE APPELLANT HAD NO MARKETING S ET UP AND HAD THE APPELLANT PUT UP ITS OWN MARKETING SET UP, THE SAME WOULD HAVE RESULTED IN EXTRA EXPENSES, I.E. MORE THAN PAYING THE COMMIS SION TO IFFL. THUS ONCE IT BE SO, THAT ENTIRE MARKETING WORK WAS ENTRU STED, TO IFFL, THEN THERE WAS ABSOLUTELY NO CASE FOR CLAIMING ANY FURTHER COM MISSION PAYMENT MADE FOR THE SAME SALE FOR WHICH AGREED COMMISSION WAS PAID TO IFFL, TO ANY OTHER INDIVIDUAL OR OTHER ENTITIES. 4.4.8 FURTHER STILL IT MAY BE OBSERVED, THAT IT CAN NOT BE ACCEPTED AS A MATTER OF FACT THAT FOR THE SAME SALE FOUR DIFFEREN T INDIVIDUALS WOULD BE MAKING SIMULTANEOUS EFFORTS AND COMMISSION WOULD BE REQUIRED TO BE PAID TO FOUR DIFFERENT PERSONS FOR THE SAME SALE. SO IS THE POSITION IN RESPECT OF ANOTHER SALE FOR WHICH COMMISSION PAYMENT HAS BEEN MADE TO TWO DIFFERENT INDIVIDUALS. IT MAY ALSO BE OBSERVED THA T THESE SIX INDIVIDUALS PRIMA FACIE BELONGED TO TWO FAMILY GROUP I.E. KALWA NI AND SETHI AND IN THE FACTS OF THE APPELLANTS CASE SUCH PAYMENT CANNOT B E HELD TO BE GENUINE IFF HILSON PRIVATE LIMITED 4 BUSINESS PAYMENT, WHICH IS ADMISSIBLE AS DEDUCTION U/S 37(1) OF THE IT ACT, WHEN ENTIRE MARKETING WORKS WAS ENTRUSTED TO I FFL. 4.4.9 IT IS SETTLED POSITION OF LAW THAT ONUS SQUAR ELY RESTS ON THE ASSESSEE/APPELLANT TO PROVIDE AND TO ESTABLISH THE ADMISSIBILITY OF ANY BUSINESS EXPENDITURE UNDER PROVISIONS OF THE ACT WH ICH IS NOT DISCHARGED BY THE APPELLANT IN THE FACTS OF THE APPELLANTS CA SE. MERE SUBMISSION OF COPY OF AGREEMENTS AND DISCLOSURE OF SUCH INCOME IN THE HANDS OF PAYEES IS NOT OF ANY CONSEQUENCE, UNLESS THE GENUINENESS O F SUCH PAYMENT AND BUSINESS NECESSITY AND EXPEDIENCY AS REASONABLENESS , CONSIDERING OTHER SUBSTANTIAL COMMISSION PAYMENT ON SAME SALE @ 7.5% WAS ESTABLISHED BY THE APPELLANT. EVEN SUCH PAYEES COULD NOT BE PRODU CED BEFORE ASSESSING OFFICER FOR EXAMINATION EVEN WHEN DIRECTED AND THUS THE APPELLANT HAS GROSSLY FAILED TO ESTABLISH THE ADMISSIBILITY OF SU CH CLAIM. ACCORDINGLY THE DISALLOWANCE MADE BY ASSESSING OFFICER AT RS.164400 0/- IS HEREBY CONFIRMED. 8.WITH RESPECT TO COMMISSION PAID TO INDIVIDUALS, A CLEAR FINDING HAS BEEN RECORDED BY BOTH LOWER AUTHORITIES TO THE EFFECT TH AT GENUINENESS OF SERVICES RENDERED VIS--VIS COMMISSION PAID TO SIX INDIVIDUALS COULD NOT BE PROVED BY THE ASSESSEE. IT WAS ALSO FOUND THAT THE COMMISSION WAS PAID TO FOUR INDIVIDUALS IN RESPECT OF THE SAME SALES, W HICH IS PRACTICALLY NOT FEASIBLE. SUFFICIENT OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO PRODUCE THE RECIPIENT OF COMMISSION, BUT HE GROSSLY FAILED TO P RODUCE THE SAME. THUS, NEITHER SERVICES RENDERED BY THESE INDIVIDUALS WERE PROVIDED NOT THE BUSINESS NECESSITIES FOR SUCH COMMISSION PAYMENT WA S PROVED. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CIT(A) FOR CONFIRMING DISALLOWING OF COMMISSION OF RS.16.44 LACS PAID TO THE INDIVIDUAL. 7. IT IS TRUE THAT THE ASSESSMENT PROCEEDINGS AND P ENALTY PROCEEDINGS ARE INDEPENDENT OF EACH OTHER. HOWEVER IN THE PRESENT CASE THE ISSUE WHICH IS LIMITED TO DISALLOWANCE OF COMMISSION EXPENSES AND AS RIGHTLY OBSERVED BY THE TRIBUNAL TH AT THE ASSESSEE HAS ALREADY CLAIMED INCREASED COMMISSION EXPENDITUR E WHICH HAS BEEN PAID TO M/S. INDUSTRIAL FILTER & FABRICATIONS PVT. LTD AND THE CLAIM OF ASSESSEE PAYING COMMISSION TO OTHER SIX PA RTIES FOR THE SAME WORK CANNOT BE ADMITTED AS A GENUINE EXPENDITU RE. WE ALSO OBSERVE THAT THE ASSESSEE WAS UNABLE TO PRODUCE ANY OF THE SIX INDIVIDUALS BEFORE THE ASSESSING AUTHORITIES SO AS TO PROVE THE IFF HILSON PRIVATE LIMITED 5 GENUINENESS AS WELL AS THE NATURE OF SERVICES PROVI DED TO THE ASSESSEE WHICH WERE DIFFERENT FROM THOSE PROVIDED B Y INDUSTRIAL FILTER & FABRICATIONS PVT.LTD. THE ASSESSEE HAS ME RELY REPEATED THAT IT HAS FILED ALL THE EVIDENCES BUT NO WAY IT H AS BEEN ABLE TO SHOW THE NATURE OF WORK DONE BY THE SIX INDIVIDUALS AND THE BENEFITS DERIVED THERE FROM. 8. WE THEREFORE ARE OF THE VIEW THAT IN THE GIVEN F ACTS AND CIRCUMSTANCES OF THE CASE THE IMPUGNED COMMISSION E XPENSES WERE CHARGED TO PROFIT AND LOSS ACCOUNT WITH THE INTENTI ON OF LOWERING DOWN THE INCOME SO AS TO EVADE THE TAX AND SUCH ACT SQUARELY FALLS IN THE CATEGORY OF FURNISHING INCORRECT PARTICULAR S OF INCOME AND IS SUBJECT TO PENALTY U/S 271(1)(C) OF THE ACT. WE THE REFORE FIND THAT LD. CIT(A) HAS RIGHTLY CONFIRMED THE PENALTY. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMI SSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 12.01.201 8. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 12, JANUARY, 2018 COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER PRIVATE SECRETARY/DDO, INDORE