The ACIT, Circle-3, Surat V. M/s. Anand Enterprise, Surat

ITA 990/AHD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9842 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 29-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 143(3); 133(6); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I R. P. TOLANI , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE ACIT, CIRCLE - 3, SURAT (APPELLANT) VS M/S. ANAND ENTERPRISE, 305 - 306 JAY SAGAR COMPLEX, KHATODARA, SURAT - 395002 PAN:AAHFA1845J (RESPONDENT) REVENUE BY : S H RI JAMES KURIAN , SR. D . R. ASSESSEE BY: NONE DATE OF HEARING : 29 - 11 - 2 016 DATE OF PRONOUNCEMENT : 08 - 12 - 2 016 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS REVENUE S APPEAL FOR A.Y. 2009 - 10 , AR ISE S FROM ORDER OF THE CIT(A) - IV, SURAT DATED 24 - 01 - 2013 IN APPEAL NO. CAS - IV / II/166/2011 - 12 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 990 / A HD/20 13 A SS ESSMENT YEAR 200 9 - 10 I.T.A NO. 990 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. ANAND ENTERPRISE 2 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - [1] ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) - I, SURAT HAS ERRED IN DELETING THE ADDITION MADE OF RS.25,85,856/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO PROVE THE GENUINENESS AND NECESSITY OF THE EXPENSES WITH SUFFICIENT EVIDENC ES. [2] ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) - I, SURAT HAS ERRED IN DELETING THE ADDITION MADE OF RS. 16,19,700/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO PRODUCE COPIES OF ANY AGREEMENT WITH THE BROKERS & COMMISSION AGENTS AND DETAILS OF SERVICES RENDERED BY THEM. 3. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. 16,93,533/ - WAS FILED ON 28/09/2009. THE ASSESSEE FIRM WAS ENGAGED IN THE BUSINESS OF YARN TRADING. THE ASSESSING OFFICER HAD DE TERMINED THE TOTAL INCOME OF THE ASSESSE AT RS. 58,90,090/ - U/S. 143(3) OF THE ACT. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD NOTICED THAT THE ASSESSE IS AN AGENT OF THE RELIANCE INDUSTRIES LTD (RIL). HE FURTHER STATED TH AT ON THE BASIS OF THE WRITTEN AGREEMENT BETWEEN THE RIL AND THE ASSESSEE, THE ASSESSE HAD RE CEI VE D COMMISSION/SERVICE CHARGES ON SAL ES MAD E ON BEHALF OF THE RIL. THE ASSESSING O FFICER FURTHER STATED THAT DURING THE YEAR TH E ASSESSEE HAD DEBITED TRANSPOR TATION EXPENSE S OF RS. 25,85,856/ - IN RESPECT OF GOODS SUPPLIED FROM RIL TO CST GODOWN, SAROLI DIRECT CUSTOMERS AND RIL WAREHOUSE GODOWN. THE ASSESSING OFFICER I.T.A NO. 990 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. ANAND ENTERPRISE 3 OBSERVED THAT THE TRANSPORT EXPENSES NOT TO BE INCURRED BY THE ASSESSEE AND THE SAME WERE TO BE COLLECTED FROM THE CUSTOMERS FOR REMITTING TO THE RIL. THE REFORE,THE ASSESSING OFFICER HAD DISALLOWED THE TRANSPORTATION EXPENSES OF RS . 25,85,856/ - U/S37(I) OF THE ACT. 5 . AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE HAD FILED AP PEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX(A). THE LD. COMMISSIONER OF INCOME TAX(A) HAD DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE DECISION OF THE LD. COMMISSIONER OF INCOME TAX(A) IS REPRODUCED AS UNDER: - 3.2. IN APPEAL, THE APPELLANT SUBMITTED THAT IT WAS A DEL CREDRE AGENT OF RELIANCE INDUSTRIES LTD. IT HAS SUBMITTED THAT IT PROCURED VARIOUS YARN FROM RIL WHICH WERE SUPPLIED BY RIL FROM ITS TWO DEPOTS - ONE AT DADRA & NAGAR HAVELI & THE OTHER AT SURAT. IT WAS FURTHER STATED THAT P.O. Y. YARN WAS DELIVERED DIRECTLY FROM SURAT DEPOT & ON THIS FREIGHT EXPENSES WERE NOT INCURRED OR CLAIMED BY THE APPELLANT. THE APPELLANT FURTHER POINTED OUT THAT THE SECOND SEGMENT OF ITS BUSINESS WAS EARNING DEL CREDRE COMMISSION ON SELLING OF POLYESTER TE XTURED YARN (PTY) WHICH WAS PROCURED FROM THE RELIANCE FACTORY AT NAROLI. THE APPELLANT SUBMITTED THAT THE FREIGHT COST FROM NAROLI (SILVASA) TO SURAT ON PROCUREMENT OF THIS YARN WAS BORNE BY THE APPELLANT AND NOT RIL. IN SUPPORT OF ITS CONTENTION THE APPE LLANT FILED A LETTER DATED 13/06/2012 FROM RIL. RIL VIDE THAT LETTER CLARIFIED THAT ALL PTY (POLEYESTER TEXTURISED YARN) SOLD & DISPATCHED FROM THEIR SILVASSA PLANT AND NIYOL DEPOT ONLY WAS DONE ON 'EX - WORKS OR EX - DEPOT' BASIS, I.E. THE FREIGHT WAS BORNE B Y THE CUSTOMER IN EACH AND EVERY CASE. IN SUPPORT OF THOSE FACTS, THE APPELLANT SUBMITTED TWO INVOICE - CUM - CHALLANS; ONE IN RESPECT OF SALE OF P.T.Y. IN WHICH THE SALE PRICE DID NOT INCLUDE FREIGHT EXPENSES AND THE OTHER IN RESPECT OF SALE OF P.O.Y. IN WHIC H THE VALUE OF GOODS INCLUDED FREIGHT EXPENSES. 3.3. THESE FACTS WERE SENT TO THE AO FOR HER COMMENTS AND NECESSARY VERIFICATION AND FOR GIVING PROPER OPPORTUNITY TO THE APPELLANT IN ACCORDANCE TO LAW AND NATURAL JUSTICE OR OPPORTUNITIES. I.T.A NO. 990 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. ANAND ENTERPRISE 4 THE AO IN HIS RE PORT DATED 10.01.2013 SUBMITTED THAT IN RESPONSE TO NOTICE U/S. 133(6) OF THE IT ACT, RELIANCE INDUSTRIES LTD. VIDE LETTER DATED 24.12.2011 HAS STATED THAT THE DELIVERY OF PTY WAS DONE ON EX - WORK OR EX - DEPOT BASIS AND THE FREIGHT COST WAS BORNE BY THE APPE LLANT. THE RIL FURTHER CLARIFIED THAT DURING THE AY 2009 - 10 THEY HAD NOT PAID OR REIMBURSED ANY FREIGHT EXPENSES TO THE APPELLANT. 3.4. IN VIEW OF THE FACTS NARRATED ABOVE WHICH HAVE ALSO BEEN CONFIRMED BY THE AO IN HER REMAND REPORT THE DISALLOWANCE OF T RANSPORTATION EXPENSES OF RS. 25,85,856/ - MADE BY THE AO IS NOT JUSTIFIED. THE SAME IS DELETED. 6 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL CONTENDED THAT THE ASSESSEE WAS A DEL CENTRE AGENT OF RELIANCE INDUSTRIES LTD IT HAD P ROCURED VARIOUS YARNS FROM RIL FROM ITS TWO DEPOTS AT DADRA& NAGAR HAVELI & SURAT AND MADE FURTHER SUPPLY TO THE CUSTOMERS . REGARDING THE NATURE OF OPERATION, HE SUBMITTED THAT THERE WERE TWO SEGMENT OF ITS BUSINESS. IN THE FIRST SEGMENT, THE POLY YARN WAS DELIVERED DIRECTLY FROM SURAT DEPOT AND ON THIS FREIGHT EXPENSES WERE NOT INCURRED OR CLAIMED BY THE ASSESSE AND HE FURTHER SUBMITTED THAT THE SECOND SEGMENT PERTAINS TO THE POLLYSTER TEXTURED YARN (PTY) WHICH WAS PROCURED FROM THE RELIANCE FACTORY AT NAROLI + SURAT ON WHICH THE FREIGHT COST WAS NOT BORNE BY THE ASSESSEE AND NOT BY THE RIL. ON THE OTHER HAND, THE LD. D.R. RELIED ON THE ORDER OF THE ASSESSING OFFICER. 7 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. WE FI ND THAT DURING THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE THE LD. COMMISSIONER OF INCOME TAX(A), THE ASSESSEE HAD FURNISHED THE INVOICES CUM CHALLAN IN RESPECT OF SALE OF I.T.A NO. 990 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. ANAND ENTERPRISE 5 PTY AND POY. IN RESPECT OF SALE OF P TY, THE FREIGHT WAS NOT INCLUDED, O N THE OT HER HAND, IN RESPECT OF SALE OF POY, THE FREIGHT WAS INCLUDE IN THE VALUE OF GOODS. WE NOTICED THAT THE LD . COMMISSIONER OF INCOME TAX(A) HAS ALSO CALLED VERIFICATION REPORT FROM THE ASSESSING OFFICER IN WHICH HE STATED THAT THE DELIVERY OF PTY WAS DONE O N EX - WORK OR EX - DEPOT WITHOUT INCLUDING THE FREIGHT COST. THESE FACTS WERE ALSO CONFIRMED BY THE RIL THAT THEY HAD NOT PAID OR REIMBURSED ANY FREIGHT EXPENSES TO THE ASSESSEE. IN VIEW OF THE ABOVE STATED FACTS AND FINDINGS, WE UPHOLD THE DECISION OF THE LD. COMMISSIONER OF INCOME TAX(A) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER DISALLOWANCE OF COMMISSION AND BROKERAGE EXPENSES: 8 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD DISALLOWED THE CLAIM OF THE ASSESSEE FO R COMMISSION AND BROKERAGE EXPENSES TO THE AMOUNT OF RS. 16,19,700/ - ON FAILING TO PRODUCE THE AGREEMENT WITH THE BROKERS AND COMMISSION AGENTS AND DETAILS OF SERVICES RENDERED BY THEM. 9 . AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE HAD MADE APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX(A). THE LD. COMMISSIONER OF INCOME TAX(A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER, THE DECISION OF THE LD. COMMISSIONER OF INCOME TAX(A) IS REPRODUCED AS UNDER: - I.T.A NO. 990 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. ANAND ENTERPRISE 6 4.4. I HAVE GONE T HROUGH THE ASSESSMENT ORDER, THE SUBMISSIONS OF THE APPELLANT AND THE REPORT DATED 10.01.2013 OF THE AO. THE DISALLOWANCE OF BROKERAGE/COMMISSION PAYMENTS WAS MADE SOLELY BECAUSE THERE WERE NO WRITTEN AGREEMENTS BETWEEN THE BROKERS AND THE APPELLANT. THE A O IN THE ASSESSMENT ORDER OBSERVED THAT THE YARN FOR WHICH THE APPELLANT WAS THE AGENT OF RIL WAS ALWAYS IN GREAT DEMAND AND PURCHASE PARTIES HAS TO WAIT FOR THE DELIVERY OF THE YARN WHICH WERE ALWAYS IN SHORT SUPPLY. ON THE BASIS OF THOSE OBSERVATIONS ONL Y THE AO REJECTED THE CONTENTIONS OF THE APPELLANT THAT PAYMENT OF BROKERAGE/COMMISSION WAS NECESSARY TO HANDLE LARGE VOLUME OF SALES. THE APPELLANT HAD GIVEN THE COMPLETE WORKING OF BROKERAGE PAYMENT ALONG WITH THE COMPLETE ADDRESS OF THE BROKERS DURING T HE ASSESSMENT AND APPEAL PROCEEDINGS. NO INDEPENDENT INQUIRIES/VERIFICATION WERE MADE AT THE ASSESSMENT STAGE TO REFUTE THE CLAIM OF THE APPELLANT. ON ALL THE PAYMENTS TAX HAD BEEN DEDUCTED AT SOURCE. IN THE PAST ALSO THE APPELLANT HAS CLAIMED BROKERAGE AN D COMMISSION PAYMENTS WHICH HAD BEEN ACCEPTED BY THE DEPARTMENT. DEALING IN YARNS THROUGH BROKERS IS A PREVALENT PRACTICE IN SURAT WHICH HAS ALSO BEEN CONFIRMED BY THE AO ON THE BASIS OF INQUIRIES MADE BY HER. IN VIEW OF THE ABOVE FACTS THAT DISALLOWANCE O F COMMISSION AND BROKERAGE EXPENSES OF RS. 16,19,700/ - IS DELETED. 10 . DURING THE APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL CONTENDED THAT THE ASSESSING OFFICER HAS MADE THIS DISALLOWANCE MAINLY ON THE GROUND THAT THERE WAS NO WRITTEN AGREEMENT BE TWEEN ASSESSEE AND BROKER IN SUPPORT OF THESE EXPENSES. HE FURTHER SUBMITTED THAT THE TDS WAS DEDUCTED FROM THE BROKERAGE PAYMENT AND RELATED DETAILS OF THE BROKERS WERE ALSO SUBMITTED TO THE ASSESSING OFFICER. HE SUBMITTED THAT BEING AN AGENT OF RIL TO FACILITATE MARKETING OF THE PRODUCT THEY HAD USED THE SERVICES OF BROKERS AND AGENTS IN THE LOCAL MARKET. ON THE OTHER HAND, THE LD. D.R. RELIED ON THE ORDER OF ASSESSING OFFICER. I.T.A NO. 990 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. ANAND ENTERPRISE 7 11 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. WE N OTICED THAT THE ASSESSING OFFICER HAD MADE THIS DISALLOWANCE BECAUSE OF NOT HAVING WRITTEN AGREEMENT BETWEEN THE BROKERS AND THE ASSESSEE. WE FIND THAT THE ASSESSEE HAD GIVEN COMPLETE WORKING OF BROKERAGE PAYMENT AND COMPLETE ADDRESSES OF THE BROKERS TO WHOM THE BROKERAGE WAS PAID. THE ASSESSEE HAD DEDUCTED THE DUE TDS ON THE BROKERAGE PAYMENT MADE TO THE BROKERS. WE ALSO OBSERVED THAT THE ASSESSING OFFICER HAD NOT MADE ANY INDEPENDENT INQUIRIES/VERIFICATION FROM THE BR ORKERS TO DISPROVE THE CLAIM OF TH E ASSESSEE. WE ALSO FIND THAT THE ASSESSING OFFICER IN HIS REPORT TO THE LD. COMMISSIONER OF INCOME TAX(A) BASED ON VERIFICATION MADE U/S. 131 OF THE ACT FROM THE SIMILAR DEALERS/MARKETING AGENTS OF THE RIL CONFIRMED THAT COMMISSION AND BROKERAGE PAYMENT WAS ACCORDING TO THE PREVAILING PRACTICE IN THE MARKET. 11.1 AFTER CONSIDERING THE ABOVE FACTS AND FINDINGS OF THE LD. CO MMISSIONER OF INCOME TAX(A), WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX(A). 12 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 08 - 12 - 201 6 SD/ - SD/ - ( R.P. TOLANI ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 08 /12 /2016 I.T.A NO. 990 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. ANAND ENTERPRISE 8 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,