The DCIT, Circle-1, Surat V. Jagga Prints Pvt.Ltd., Surat

ITA 985/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89633 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 04-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: RASESH SHAH
• Keywords: Rule of consistency; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: S H RI N.S. SAINI , ACCOUNTANT MEMBER AND SHR I RAJPAL YADAV , JUDICIAL MEMBER THE DY. COMMISSIONER OF INCOME TAX, ROOM NO. 108, AAYAKAR BHAVAN, MAJURA GA T E, SURAT (APPELLANT) VS M/S. JAGGA PRINTS PVT. LTD. E/F, 301 TO 305, TIRUPATI MARKET, MOTI BEGAMWADI, SALABATPURA, SURAT PAN: AABCJ 4090 P (RESPONDENT) REVENUE BY : S H RI M. K. SINGH , SR. D . R. ASSESSEE BY: S H RI RASESH SHAH , A.R. DATE OF HEARING : 04 - 06 - 2 015 DATE OF PRONOUNCEMENT : 19 - 06 - 2 015 / ORDER P ER : RAJPAL YADAV , JUDICIAL MEMBER : - REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 20 - 01 - 2011 PASSED FOR ASSESSMENT YEAR 207 - 08. I T A NO . 985 / A HD/20 11 A SSESSMENT YEAR 200 7 - 08 I.T.A NO. 985/AHD/2011 A.Y. 2007 - 08 PAGE NO DCIT VS. M/S. JAGGA PRINTS PVT. LTD 2 2 . THE REVENUE HAS TAKEN FOUR GROUNDS OF APPEAL , OUT OF WHICH GROUND NO. 3 AND 4 ARE GENERAL GROUNDS OF APPEAL WHICH DO NOT CALL FOR RECORDING OF ANY SPECIFIC FINDING AT THE END OF TRIBUNAL HENCE , THEY ARE REJECTED. 3 . IN GROUND NO. 1, IT IS PLEADED THAT LD. COMMI SSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 16,69,190/ - . 4 . BRIEF FACTS OF TH E CASE ARE THAT ASSESSEE HAS FI L E D ITS RETURN OF INCOME ON 31 - 10 - 2007 ELECTRONICALLY , DECLARING TOTAL INCOME AT RS. 10,86,070/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSME NT AND A NOTICED U/S. 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ASSESSEE, IT REVEALED TO THE ASSESSING OFFICER THAT ASSESSEE HAD MADE PAYMENTS IN THE SHAPE OF INTEREST, SHOP RENT AND CAR RENT TO THE PERSON WHO COVERED U/S. 40A(2)( B) OF THE INCOME TAX ACT. THE ASSESSEE HAD PAID INTEREST OF RS. 4,41,577/ - TO SEVEN PERSONS @ 18%. ACCORDING TO THE ASSESSING OFFICER , THE INTEREST RATE IN THE BANK WAS IN BETWEEN 11.25% TO 12%, THEREFORE, THE PAYMENT OF INTEREST @ 18% IS NOT IN CONSUMER ATE WITH THE MARKET RATES AND THEREFORE THE ASSESSE HAS EXTENDED UNDUE BENEFIT TO THE PERSON SPECIFIED U/S. 40(A)(2)(B) OF THE INCOME TAX ACT. SIMILARLY, HE NOTICED THAT IN ASSESSMENT YEAR 2007 - 08 ASSESSEE HAD PAID RENT FOR THE SHOP AT 20,10,000/ - WHEREA S , IN ASSESSMENT YEAR 2006 - 07 , T HE RENT WAS PAID AT 5,28,000/ - . THE ASSESSING OFFICER HAS MADE DISALLOWANCE AT RS 14,82,000/ - . H E FURT HER FOU ND THAT CAR RENTALS OF RS . 3,60,000/ - HAS BEEN PAID IN ASSESSMENT YEAR 200 7 - 08 . THE LD. ASSESSING OFFICER HAS DI SALLOWED THESE ALLEGED EXCESS PAYMENTS ON ACCOUNT OF INTEREST, SHOP RENT AND CAR RENTALS. I.T.A NO. 985/AHD/2011 A.Y. 2007 - 08 PAGE NO DCIT VS. M/S. JAGGA PRINTS PVT. LTD 3 5. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THE DISALLOWANCES BY OBSERVING THAT ASSESSING OFFICER FAILED TO BRING ANY EVIDENCE DEMONSTRATING THE F ACT THAT THESE FACILITIES COULD BE AVAILED BY THE ASSESSEE AT A LESSER RATE FROM THE OPEN MARKET. 6. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF ASSESSING OFFICER AND SUBMITTED THAT IN EARLIER YEAR ASSESEE HAS PAID RENT FOR THE CAR @ 1,2 0,000/ - TO EACH PERSON. THIS YEAR, ASSESSEE HAS INCREASED THE RENTAL PAYMENT. ON THE OTHER HAND , LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). 7. WITH THE ASSISTANCE OF LD. REPRESENTATIVES, WE HAVE GONE T HROUGH THE RECORD CAREFULLY. ON PERUSAL OF SECTION 40A(2) (B) , IT REVEALS THAT IF ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT H AS BEEN MADE OR IS TO BE MADE TO ANY PERSON REFERRED TO CLAUSE B OF THIS SUB - SECTION AND ASSESSING OFFICER IS OF THE OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHICH T HE PAYMENT IS MADE OR TO BE MADE IN RESPECT OF THE BUSINESS OR THE PROFESSION OF THE ASSESSEE OR THE BENE FIT DERIVED BY OR ACCORDED TO HIM THEREFROM, SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY THE ASSESSING OFFICER TO BE EXCESSIVE AND UNREASONABLE SHALL NOT BE ALLOW ED AS A DEDUCTION. SUB - CLAUSE B GAVE A LIST OF PERSON. NO DOUBT , THE PAYEES TO WHOM PAYMENTS IS MADE BY THE ASSE SSEE IN THE PRESENT CASE FALLS WITHIN THE CLAUSE B . THE QUESTION IS , WHETHER THE PAYMENT WAS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF SERVICES RENDERED BY THE PAYEES. THE LD. ASSESSING OFFICER HAS NOT BROUGHT ANY EVIDENCE WITH REGARD TO THE COMPARABILITY OF THE SERVICES RENDERED BY THESE PERSONS VIS - - VIS AVAILABILITY IN THE OPEN MARKET. THE I.T.A NO. 985/AHD/2011 A.Y. 2007 - 08 PAGE NO DCIT VS. M/S. JAGGA PRINTS PVT. LTD 4 ASSESSING OFFICER HAS SIMPLY COMPARED THE PAYMENTS WITH THE PAYMENTS MADE BY THE AS SESSEE IN EARLIER YEARS. THE REQUIREMENT OF THE SECTION IS THAT SUCH PAYMENT IS TO BE COMPARED WITH THE FAIR MARKET VALUE OF THE SERVICES OR WHETHER THESE SERVICES CAN BE AVAILED AT A LOWER RATE FROM THE PERSONS WHO ARE NOT COVERED BY SUB - CLAUSE B . NO SUCH EVIDENCE HAS BEEN BR OUGHT ON RECORD, THEREFORE, LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY DELETED THE DISALLOWANCE. 8. IN THE NEXT GROUND OF APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ALLOWED BROKERAGE AND COMMISSION OF RS. 4,74,049/ - . THE ASSE SSEE HAS PAID BROKERAGE OF RS . 4,74,049/ - . THIS AMOUNT WAS DISALLOWE D TO IT BY ASSESSING OFFICER O N THE GROUND THAT ASSESSEE HAS FURNISHED NAME AND ADDRESS , PERMANENT ACCOUNT NO. OF THE BROKER BUT FAILED TO ESTABLISH THE GENUI NENESS OF THE SERVICES. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD DELETED THE DISALLOWANCE ON THE GROUND THAT IN A SS ESSMENT YEAR 2005 - 06, 2006 - 07, AND 2008 - 09 , S IMILAR PAYMENT S WERE ALLOWED BY THE ASSESSING OFFICER HI MSELF. THE ONLY YEAR IN WHIC H IT HAS BEEN DISALLOWED IS ASSESSMENT YEAR 2007 - 08. FOLLOWING THE PRINCIPLE OF CONSISTENCY, LD. COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE. 9. WITH THE ASSISTANCE OF LD. REPRESENTATIVES , WE HAVE GONE THROUGH THE RECORD CAREFULLY. FO LLOWING THE CHART NOTICED BY THE COMMISSIONER OF INCOME TAX (APPEALS) WOULD DEPICT THE DETAILS OF PAYMENT AND HOW IT HAS BEEN TREATED BY THE DEPARTMENT. A.Y. BROKERAGE PAID REMARK 2005 - 06 4,04,559/ - 10% WAS DISALLOWED BY ASSESSING I.T.A NO. 985/AHD/2011 A.Y. 2007 - 08 PAGE NO DCIT VS. M/S. JAGGA PRINTS PVT. LTD 5 OFFICER BUT WAS DELE TED BY CIT(A) 2006 - 07 5,76,165/ - ACCEPTED BY THE AO 2007 - 08 4,74,049/ - FULLY DISALLOWED BY THE AO 2008 - 09 5,31,166/ - ACCEPTED BY THE AO OUT OF THE FOUR YEARS, T HE ASSESSING OFFICER HAS HIMSELF ALLOWED IN THREE YEARS . THEREFORE, WE DO NOT SEE ANY REAS ON TO INTERFERE WITH THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS). LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY D ELETED THE DISALLOWANCES IN THIS YEAR . WE DO NOT FIND ANY MERIT IN THIS APPEAL. IT IS DISMISSED. ORDER PR O NOUNCED IN THE OPEN COURT ON 19 - 06 - 2015 SD/ - SD/ - ( N.S. SAINI ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 19 /06 /2015 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,