Shri Mushtak Khan, Indore V. ITO 2(3), Indore

ITA 97/Ind/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4935 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 12-02-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: NIRANJAN PURENDER
• Keywords: Business income; Set aside

Judgement Text

P A GE 1 | 6 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE S/SHRI C.M. GARG, JUDICIAL MEMBER AND MANISH BORAD, ACCOUNTANT MEMBER ITA NO.97/IND/2020 ASSESSMENT YEAR : 2012-13 MUSHTAK KHAN, 98, NANDANVAN, INDORE. VS. ITO 2(3), INDORE PAN/GIR NO.ACTPK 0068 R (APPELLANT ) .. ( RESPONDENT ) ITA NO.98/IND/2020 ASSESSMENT YEAR : 2012-13 ANAMTA MUSHTAK KHAN, 98, NANDANVAN, INDORE. VS. ITO 2(3), INDORE PAN/GIR NOAXFPK 3006 N (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI NIRANJAN PURENDER, CA REVENUE BY : SHRI P.K.SINGH, SR DR DATE OF HEARING : 29 /7/ 2021 DATE OF PRONOUNCEMENT : 29/ 9 /2021 O R D E R PER BENCH BOTH THE APPEALS FILED BY THE ASSESSEES AGAINST THE SEPARATE ORDER OF THE CIT(A)-III, INDORE DATED 15.11.2019 FOR THE ASSE SSMENT YEAR 2012-13. 2. FACTS AND ISSUE IN BOTH THE APPEALS ARE IDENTICA L. THEREFORE, AS A LEAD CASE, WE TAKE UP FOR ADJUDICATION ITA NO.97/IN D/2020 FOR THE ITA NOS.97 & 98/IND/2020 ASSESSMENT YEAR : 2012-13 P A GE 2 | 6 ASSESSMENT YEAR 2012-13 IN THE CASE OF MUSHTAK KHAN AND THE DECISION WILL APPLY MUTATIS-MUTANDIS IN THE CASE OF ANAMTA KHAN I N ITA NO.98/IND/2020. 3. THE ONLY EFFECTIVE ISSUE FOR ADJUDICATION IN THE GROUNDS OF APPEAL IS THAT THE LD CIT(A) ERRED IN RESTRICTING THE RELIEF UPTO 75% OF THE EXPENSES CLAIMED, RESULTING TO ADDITION OF RS.3,85,125/- UND ER THE HEAD DISCOUNT EXPENSES. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LICENSED STAMP VENDOR. THE ASSESSEE FILED THE RETURN OF INCOME ON 23.9.2012 DECLARING BUSINESS INCOME OF RS.8,04,664/-. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED COMMISSION/DISCOUNT PAYMENT TO THE TUNE OF RS.15,40 ,500/-. IT WAS SUBMITTED BEFORE THE AO THAT THE PURCHASER GENERALL Y APPROACHES THE STAMP VENDOR THROUGH ADVOCATES OR CONSULTANT TO GET DISCO UNT AND FOR THIS PROCESS, THE ASSESSEE ALLOWED DISCOUNT ABOUT 50% TO THE CLIENTS TO GENERATE HIGH TURNOVER. THE ASSESSING OFFICER DID NOT FIND THE SUBMISSION OF THE ASSESSEE ACCEPTABLE AS THE CLAIM OF THE ASSE SSEE IS NOT SUPPORTED BY DOCUMENTARY EVIDENCE. THE AO, ACCORDINGLY, DISALLO WED THE COMMISSION EXPENDITURE OF RS.12,24,600/-. 5. ON APPEAL, THE LD CIT(A) FOLLOWING THE DECISION OF THIS BENCH IN THE CASE OF THE ASSESSEE FOR A.Y. 2010-11, RESTRICTED T HE DISALLOWANCE TO 25%. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE U S. ITA NOS.97 & 98/IND/2020 ASSESSMENT YEAR : 2012-13 P A GE 3 | 6 6. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE B OOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED AND SAME ARE VERIFIED BY T HE AO. THE AO DID NOT REJECT THE BOOKS OF ACCOUNTS BUT MADE THE ADDITION ON THE BASIS OF SURMISES AND SUSPICION. HE SUBMITTED THAT BEFORE MAKING ADD ITION, THE ASSESSING OFFICER COULD NOT VERIFY THE CONFIRMATIONS FURNISHE D BY THE ASSESSEE AS TO THE REBATES GIVEN BY THE ASSESSEE TO VARIOUS CLIENT S. HE SUBMITTED THAT BESIDES THIS, THE LD CIT(A) HAS RESTRICTED THE DISA LLOWANCE TO 25%, WHICH IS NOT PROPER. 7. REPLYING TO ABOVE, LD DR SUPPORTED THE ORDER OF THE LD CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD OF THE CASE, INTER ALIA, PAPER BOOK FILED BY THE ASSESSEE. WE FIND THAT THE LD CIT(A) AFTER CONSIDERING THE DECISION OF THE TRIBUN AL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11, ON SIMILAR FACTS A ND ISSUE, RESTRICTED THE DISALLOWANCE TO 25% AND CONFIRMED BALANCE 75% DISAL LOWANCE. WE FIND THAT THE TRIBUNAL HAS DISCUSSED THE ISSUE AT LENGTH AND ALLOWED 25% DISALLOWANCE, BY OBSERVING AS UNDER: 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUNDS RUNNING FROM GROUND NO. 1 TO 7 BUT THE SOLE GRIEVANCE IS AGAINST THE FI NDING OF LD. CIT(A)CONFIRMING THE DISALLOWANCE OF COMMISSION EXP ENDITURE OF RS. 10,10,287/- CLAIMED BY THE ASSESSEE TO HAVE BEEN PA ID TO VARIOUS CUSTOMERS/REGISTRY CONSULTANTS PURCHASING THE STAMP PAPERS. 9. WE OBSERVE THAT THE ASSESSEE IS INTO THIS BUSINE SS AS STAMP VENDOR SINCE LAST MANY YEARS. FOR THE YEAR UNDER APPEAL I.E. FIN ANCIAL YEAR 2009-10 THE GROSS RECEIPT FROM SALE OF NON JUDICIAL STAMP PAPER S STOOD AT RS.12,76,87,770/- AND GROSS REVENUE FROM SALE OF JU DICIAL STAMPS AT ITA NOS.97 & 98/IND/2020 ASSESSMENT YEAR : 2012-13 P A GE 4 | 6 RS.46,05,000/-. GROSS PROFIT OF RS.20,20,574/- HAVE BEEN DISCLOSED AND AFTER CLAIMING VARIOUS INDIRECT EXPENSES INCLUDING THE IMPUGNED COMMISSION EXPENSES OF RS.10,10,287/- THE NET PROFIT OF RS.5,2 9,897/- HAS BEEN DISCLOSED AND OFFERED TO TAX. LD. A.O HAS NOT POINT ED OUT ANY MISTAKE/ERROR IN THE FIGURES OF PURCHASE, SALES, STOCK, INDIRECT INCOME AND OTHER INDIRECT EXPENSES EXCEPT THE COMMISSION EXPENDITURE OF RS.10 ,10,287/-. BOOKS OF ACCOUNTS ARE DULY AUDITED BY A CHARTERED ACCOUNTANT . 10. NOW AS FAR AS THE EXPENDITURE FOR COMMISSION OF RS.10,10,287/- IS CONCERNED ASSESSEES CLAIM IS THAT THE GROWTH IN TH IS LINE OF BUSINESS SOLELY DEPENDS ON ADOPTING COMMERCIAL TRADE PRACTICE AND T O FOLLOW THE SYSTEM PREVALENT IN THIS LINE OF BUSINESS OF SELLING THE S TAMP PAPERS WITH REQUIRES THAT IN ORDER TO RETAIN AND ATTRACT THE CUSTOMERS, COMMISSION/DISCOUNT TO BE PASSED ON TO CUSTOMERS AND CLIENTS THROUGH REGIS TRY CONSULTANTS, SINCE THESE PROFESSIONALS ARE THE BACK BONE LIMBS OF THIS BUSINESS. LD. COUNSEL FOR THE ASSESSEE ALSO PLEADED BEFORE US THAT THE LI CENCING RULES DOES NOT PROHIBIT THE VENDOR TO LOWER THE STAMPS FACE VALUE, HOWEVER SALE OF STAMPS ABOVE THE FACE IS PROHIBITED AND COMPLETE RECORDS O F STAMP PURCHASED AND SOLD ARE MAINTAINED. 11. WE ALSO OBSERVE THAT THE LD. COUNSEL FOR THE AS SESSEE WHILE REFERRING TO THE PAPER BOOK MENTIONED ABOUT TAX RETURNS, COMPUTA TION OF INCOME OF AROUND 10 REGISTRY CONSULTANTS SHOWING SUCH DISCOUN T/ COMMISSION AS THEIR INCOME IN THEIR RETURNS WHICH IS FURTHER SUPPORTED BY FEW AFFIDAVITS. 12. NOW BEFORE US TWO FACTS ARE PLACED. ON ONE HAND THE ASSESSEE HAS PLACED ALL FINANCIAL STATEMENTS, STAMP SALE REGISTE RS SHOWING THE CLAIM OF COMMISSION EXPENDITURE ALONG WITH FINANCIAL STATEME NTS, INCOME TAX RETURNS, AFFIDAVITS OF VARIOUS REGISTRY CONSULTANTS AND ALSO SHOWING THE REGISTER ENTERING DATE WISE ENTRY OF COMMISSION PAI D AS AND WHEN THE STAMPS ARE SOLD. ON THE OTHER HAND THE ONLY ALLEGAT ION MADE BY THE LD. A.O IS THAT THE CLAIM OF COMMISSION IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. IT IS TRUE THAT EACH AND EVERY ENTRY OF C OMMISSION PAYMENT THE ASSESSEE HAS NOT PROVIDED THE DETAILS AND THE SAME SEEMS TO BE IMPRACTICAL BECAUSE THE ENTRIES OF COMMISSION PAYMENT ARE MULTI PLE TIMES IN A DAY AND IT IS NOT PRACTICALLY POSSIBLE TO TAKE A RECEIPT FR OM EACH AND EVERY PERSON WHO MAY BE EITHER A REGISTRY CONSULTANTS OR THE CUS TOMER ACTUALLY USING THE STAMP FOR HIMSELF. HOWEVER ONE CANNOT DENY THE FACT THAT THE PERSON WHO IS COMING TO PURCHASE THE STAMP FROM A STAMP VENDOR IS CONSCIOUS OF THE FACT THAT THE STAMP VENDORS ARE EARNING SOME COMMIS SION/INCOME FROM SALE OF STAMP PAPER. THERE BEING MULTIPLE STAMP VEN DORS, THE CUSTOMER HAS A LIBERTY/OPTION TO PURCHASE STAMP PAPER FROM THE S TAMP VENDOR WHO GIVES MAXIMUM COMMISSION OR PARTS WITH MAXIMUM PROFITS EM BEDDED IN THE STAMP VALUE. ONE OF THE WELL KNOWN BUSINESS PRINCI PLE IS THAT FOR INCREASING THE GROSS REVENUE THE PROFIT MARGIN NEED S TO BE REDUCED AND SAME SEEMS TO BE THE SITUATION OF THE ASSESSEE. 13. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANC ES OF THE CASE AND BEING FAIR TO BOTH THE PARTIES ARE OF THE CONSIDERE D VIEW THAT OUT OF THE ITA NOS.97 & 98/IND/2020 ASSESSMENT YEAR : 2012-13 P A GE 5 | 6 TOTAL DISALLOWANCE OF RS.10,10,287/-, DISALLOWANCE OF COMMISSION TO THE EXTENT OF 25% I.E. AT RS.2,52,572/- SHALL BE JUSTIF IED TO COVER THE DEFICIENCY OF NOT MAINTAINING NECESSARY VOUCHERS AND ACKNOWLED GEMENT RECEIPTS AT THE END OF THE ASSESSEE FOR PAYING COMMISSION TO TH E PERSONS PURCHASING THE STAMP FROM HIM. WE ACCORDINGLY ORDER SO AND SET ASIDE THE FINDING OF BOTH THE LOWER AUTHORITIES AND PARTLY ALLOW ASSESSE ES APPEAL BY SUSTAINING DISALLOWANCE OF COMMISSION EXPENDITURE AT RS.2,52,5 72/-. 15. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 9. LD A.R. COULD NOT CONTROVERT THE FINDINGS OF THE TRIBUNAL BY SUBMITTING THAT THE DECISION IS VARIED BY ANY HIGHE R FORUM. IN VIEW OF ABOVE, WE FIND THAT THE LD CIT(A) HAS RESTRICTED TH E DISALLOWANCE AFTER CONSIDERING THE DECISION OF THE TRIBUNAL. HENCE, W E FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD CIT(A), WHICH IS HEREBY UPHELD. 10. IN THE CASE OF ABNAMTA KHAN, THE AO HAS DISALLOW ED COMMISSION OF RS.12,24,600/- AND THE LD CIT(A) HAS RESTRICTED THE DISALLOWANCE TO RS.3,06,150/-. IN LINE WITH OUR DECISION IN THE CA SE OF MUSTHAN KHAP, WE UPHOLD THE FINDINGS OF THE LD CIT(A) AND DISMISS TH E GROUND OF THE ASSESSEE. 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSES ARE DISMISSED. ORDER PRONOUNCED U/S.34(4) OF I.T.RULES, 1963 ON 2 9 /09 /2021. SD/- SD/- ( MANISH BORAD) (CHABNDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEM BER INDORE ; DATED 29/ 09 /2021 B.K.PARIDA, SPS (OS) ITA NOS.97 & 98/IND/2020 ASSESSMENT YEAR : 2012-13 P A GE 6 | 6 COPY OF THE ORDER FORWARDED TO : BY ORDER SR.PVT.SECRETARY ITAT, CUTTACK 1. THE APPELLANTS: MUSHTAK KHAN, 98, NANDANVAN, INDORE/ ANAMTA MUSHTAK KHAN, 98, NANDANVAN, INDORE 2. THE RESPONDENT. ITO 2(3), INDORE 3. THE CIT(A)-III, INDORE, 4. PR.CIT- III, INDORE 5. DR, ITAT, INDORE 6. GUARD FILE. //TRUE COPY//