SHRI ANIL KUMAR GUPTA, JHUNJHUNU V. INCOME TAX OFFICER , JAIPUR

MA 32/JPR/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 3785 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-08-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 25-04-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAI SINGH
• Keywords: TDS; Set aside
• Section: 254(2)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM M.A. NO. 32/JP/2019 (ARISING OUT OF ITA NO. 1030/JP/2017) FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2012-13 SHRI ANIL KUMAR GUPTA PROP. SHRI SHYAM STEEL EXCHANGE, NEAR SHANTA PRESS, MODI ROAD, JHUNJHUNU CUKE VS. ITO, WARD-1, JHUNJHUNU LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AECPG 1337 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P. C. PARWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI JAI SINGH (ADDL.CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 17/05/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 09/08/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THE PRESENT MISC. APPLICATION HAS BEEN FILED BY THE ASSESSEE AGAINST THE DECISION OF THE CO-ORDINATE BENCH IN IT A NO. 1030/JP/2017 DATED 15.10.2018. IN ITS APPLICATION, THE ASSESSEE HAS SUBMITTED AS UNDER:- 1. THE APPLICANT BEGS TO SUBMIT THAT THE ORDER GIV ING RISE TO THE PRESENT MISCELLANEOUS APPLICATION WAS RECEIVED ON 1 8.10.2018. 2. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED ORDE R OF LD. CIT(A) IN CONFIRMING THE ACTION OF THE AO IN DISALL OWING COMMISSION M.A. NO. 32/JP/2019 SHRI ANIL KUMAR GUPTA, JHUNJHUNU VS. ITO, JHUNJH UNU 2 PAID ON PURCHASES TO SHRI SANJAY GUPTA OF RS. 4,80, 240/- AND COMMISSION PAID ON SALES TO SMT. ANU GUPTA OF RS. 4 ,32,187/- U/S 40A(2)(B). 3. THE HONBLE ITAT IN PARA 7 OF ITS ORDER OBSERVED THAT BOTH SHRI SANJAY GUPTA AND SMT. ANU GUPTA HAVE BEEN WORK ING FULL TIME WITH THE ASSESSEES PROPRIETORSHIP CONCERN AT BANGA LORE AND THEY HAVE NOT BEEN PAID ANY SALARY OR OTHER CONSIDERATIO N BY THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR. THE T URNOVER OF THE ASSESSEE HAS INCREASED FROM RS. 5.9 CRORES TO R S. 12 CRORES AND THE COMMISSION HAS BEEN PAID TO THEM FOR THEIR EFFORTS ON WHICH TAX IS DEDUCTED AT SOURCE. HOWEVER, IT WAS FO UND THAT THESE PERSONS HAVE NOT BEEN ACTUALLY PAID COMMISSION AND THUS, IT SEEMS THAT THEY ARE ACTIVE PARTNERS IN THE BUSINESS OF AS SESSEES CONCERN AND THE TRANSACTION IS IN ESSENCE A TRANSACTION OF SHARE IN PROFITS THOUGH TERMED AND REFLECTED AS COMMISSION FOR SERVI CES. ACCORDINGLY, THE ISSUE WAS SET ASIDE TO THE AO WITH THE OBSERVATION THAT AO SHOULD EXAMINE WHETHER THE SIMILAR FACTS/PA TTERN EMERGES FOR OTHER YEARS AND THE VARIOUS CONTENTIONS RAISED ARE NOT COMMENTED UPON AND KEPT OPEN. 4. THE HONBLE ITAT WHILE SETTING ASIDE THE GROUND RAISED BY THE ASSESSEE HAS GIVEN A FINDING THAT SHRI SANJAY G UPTA AND SMT. ANU GUPTA HAVE BEEN WORKING FULL TIME WITH THE ASSE SSEES PROPRIETORSHIP CONCERN AT BANGALORE. BUT AT THE SAM E TIME OBSERVED THAT IN THE ABSENCE OF ACTUAL PAYMENT OF C OMMISSION, IT SEEMS THAT THESE PERSONS ARE ACTIVE PARTNERS IN THE BUSINESS OF ASSESSEES CONCERN AND THAT THE TRANSACTION IS IN E SSENCE A TRANSACTION OF SHARE IN PROFIT THOUGH TERMED AND RE FLECTED AS COMMISSION FOR SERVICES. THIS FINDING IS NEITHER BO RNE OUT FROM THE M.A. NO. 32/JP/2019 SHRI ANIL KUMAR GUPTA, JHUNJHUNU VS. ITO, JHUNJH UNU 3 ASSESSMENT ORDER NOR SUCH ARGUMENT IS PLACED BY ANY OF THE PARTY BEFORE IT. THEREFORE, FINDING GIVEN BY THE HONBLE ITAT WHICH IS NOT BORNE OUT FROM RECORD IS A MISTAKE APPARENT ON RECO RD. 5. HAVING GIVEN SUCH FINDING, THE HONBLE ITAT HAS NOT DECIDED THE VARIOUS OTHER CONTENTIONS RAISED BY THE ASSESSE E AND THE SAME ARE KEPT OPEN (REFER PAGE 9, LINES NOS. 11 TO 13 OF THE ORDER). AS PER SECTION 254, THE HONBLE ITAT IS REQUIRED TO DE CIDE THE APPEAL ON THE BASIS OF THE CONTENTIONS RAISED AND AS PER T HE PROVISIONS OF THE ACT. THE ACT DOES NOT PROVIDE THAT THE CONTENTI ONS RAISED BY THE PARTIES CAN BE KEPT OPEN. THEREFORE, NOT DECIDI NG THE VARIOUS CONTENTIONS AND KEEPING THE SAME OPEN IS A MISTAKE APPARENT ON RECORD. 6. SINCE THE ABOVE MISTAKES ARE APPARENT ON RECORD, IT IS REQUESTED TO KINDLY PASS APPROPRIATE ORDER U/S 254 OF THE IT ACT AND OBLIGE. 2. HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN PARA 7 OF ITS ORDER DATED 15.10.2018, T HE BENCH HAS GIVEN ITS FINDINGS AND HELD AS UNDER: 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN HIS TRADING AND PR OFIT AND LOSS ACCOUNT, THE ASSESSEE HAS DEBITED A SUM OF RS. 4,80 ,240/- AS COMMISSION ON PURCHASES AND AN AMOUNT OF RS. 4,32,1 87/- AS COMMISSION ON SALES. IT IS NOT IN DISPUTE THAT BOTH SHRI SANJAY GUPTA AND SMT. ANNU GUPTA HAVE BEEN WORKING FULL TI ME WITH THE ASSESSEE PROPRIETORSHIP CONCERN AT BANGALORE. IT IS ALSO NOT DISPUTED THAT THEY HAVE NOT BEEN PAID ANY SALARY OR OTHER CONSIDERATION BY THE ASSESSEE DURING THE IMPUNGED A SSESSMENT M.A. NO. 32/JP/2019 SHRI ANIL KUMAR GUPTA, JHUNJHUNU VS. ITO, JHUNJH UNU 4 YEAR. THE ASSESSEES CONTENTION IS THAT THEY HAVE B EEN PAID REMUNERATION IN THE FORM OF COMMISSION WITH RESPECT TO THE PURCHASES AND THE SALES AFFECTED BY SHRI SANJAY GUP TA AND AMT. ANNU GUPTA RESPECTIVELY AND IT IS ONLY BECAUSE OF T HEIR EFFORTS THAT THE ASSESSEES PROPRIETORSHIP CONCERN HAS BEEN ABLE TO ALMOST DOUBLE THE TURNOVER TO RS. 12 CRORE FROM 5.9 0 CRORES IN THE LAST YEAR AND THE COMMISSION IS THEREFORE, COMM ENSURATE WITH THE EFFORTS MADE BY THEM. IN ORDER TO APPRECIA TE THE SAID CONTENTION, WE REFER TO THE LEDGER ACCOUNT OF SHRI SANJAY GUPTA IN THE BOOKS OF THE ASSESSEE FOR THE PERIOD APRIL, 20 11 TO 31 ST MARCH, 2012 AND ON PERUSAL OF THE LEDGER, IT IS NOT ED THAT ON 31 ST MARCH, 2012, THE ASSESSEE HAS PASSED A JOURNAL ENTR Y WHERE INTEREST ON BORROWINGS AMOUNTING TO RS. 3,08,033/- AND COMMISSION ON PURCHASES AMOUNTING TO RS. 4,80,240/- HAS BEEN CREDITED TO THE ACCOUNT OF SHRI SANJAY GUPTA. FURTH ER, IT IS OBSERVED THAT THERE IS OPENING BALANCE OF RS. 24,75 ,021/- AND DEPOSIT OF RS. 1 LACS AND PAYMENT OF RS. 54,746/-. FURTHER, THERE ARE ENTRIES REGARDING TDS DEDUCTED ON INTEREST AND ON THE COMMISSION ON PURCHASES AND THEN, WITH CLOSING BALA NCE OF RS. 3,29,721/-. WE, THEREFORE, NOTE THAT THE ASSESSEE H AS PROVIDED FOR THE COMMISSION ON PURCHASES ON THE LAST YEAR OF THE FINANCIAL YEAR AND AND THERE ARE NO WITHDRAWALS COMMENSURATE TO THE COMMISSION SO CREDITED BY THE ASSESSEE IN THE ACCOU NT OF SHRI SANJAY GUPTA. IT APPEARS THAT SPECIALLY GOING BY TH E OPENING AND CLOSING BALANCES, THE AMOUNT OF LOW WITHDRAWALS VIS --VIS THE COMMISSION AND THE FACT THAT INTEREST ON BORROWINGS HAS ALSO BEEN CREDITED TO THE ACCOUNT OF SHRI SANJAY GUPTA T HAT THE COMMISSION ON PURCHASES WHICH IS CREDITED TO HIS AC COUNT IS NOT M.A. NO. 32/JP/2019 SHRI ANIL KUMAR GUPTA, JHUNJHUNU VS. ITO, JHUNJH UNU 5 ACTUALLY PAID TO HIM AND THE SAME IS BEING ACCUMULA TED AND SHOWN AS OUTSTANDING AT THE YEAR END. THE SAID OUTS TANDING AMOUNT IS THEN SHOWN AS BORROWING BY THE ASSESSEE F ROM SHRI SANJAY GUPTA AND INTEREST ON SUCH BORROWINGS HAVE A LSO BEEN CREDITED TO THE ACCOUNT OF SHRI SANJAY GUPTA. THE S CENARIO, WHICH THEREFORE EMERGES IS THAT FOR THE INVOLVEMENT OF SH RI SANJAY GUPTA IN THE ASSESSEES BUSINESS ON FULL TIME BASIS , HE HAS NOT BEEN ACTUALLY PAID EITHER THE COMMISSION OR THE INT EREST ON THE BORROWINGS AND THE SAID ACCUMULATED COMMISSION AND EARNINGS THEREON REMAIN INVESTED IN THE ASSESSEES PROPRIETO RSHIP CONCERN. TOWARDS THE CLOSE OF THE FINANCIAL YEAR, ACCOUNTING ENTRIES ARE PASSED SHOWING THE COMMISSION AND INTEREST EXPENDIT URE AND THE SAME ARE CLAIMED AS EXPENDITURE IN THE PROFIT/LOSS ACCOUNT AND SUBSEQUENTLY, IN THE RETURN OF INCOME. IN SUBSTANC E, THE INVOLVEMENT OF SHRI SANJAY GUPTA IN THE BUSINESS OF THE ASSESSEES CONCERN IS NOT JUST BY WAY OF HIS FULL T IME INVOLVEMENT BUT ALSO FINANCIALLY WHEREBY HIS SO CALLED COMMISSI ON AND INTEREST INCOME REMAIN INVESTED IN ASSESSEES CONCERN AND NO T WITHDRAWN AT ANY POINT IN TIME. IN EFFECT, IT SEEMS THAT HE IS AN ACTIVE PARTNER IN THE BUSINESS OF THE ASSESSEES CONCERN. HOWEVER, WE MAY ADD THAT WHAT WE HAVE EXAMINED ARE THE FACT PER TAINING TO FINANCIAL YEAR 2011-12 RELEVANT TO IMPUNGED ASSESSM ENT YEAR, HOWEVER, WHETHER THE SAME FACTS ARE FOUND REPEATED YEAR ON YEAR BASIS, IT WILL CONCLUSIVELY LED TO BELIEF THAT SHRI SANJAY GUPTA IS NOT EMPLOYED WITH THE ASSESSEE CONCERN AS ANY OT HER EMPLOYEE WHO IS BEING PAID REMUNERATION IN THE FORM OF COMMISSION, RATHER HE IS A PARTNER IN THE ASSESSEE S CONCERN AND IT IS THEIR MUTUAL UNDERSTANDING/DECISION AMONG THE PARTNERS NOT M.A. NO. 32/JP/2019 SHRI ANIL KUMAR GUPTA, JHUNJHUNU VS. ITO, JHUNJH UNU 6 TO WITHDRAW THE SHARE OF PROFIT FROM THE ASSESSEES CONCERN RATHER THE SAME REMAINED INVESTED IN THE ASSESSEES CONCERN. NO DOUBT, SHRI SANJAY GUPTA HAS REPORTED BOTH THE COMM ISSION ON PURCHASES AND THE INTEREST ON BORROWINGS AS PART OF HIS TAXABLE INCOME IN HIS RETURN OF INCOME. HOWEVER, MERE FACT THAT THE RECIPIENT HAS OFFERED THE AMOUNT AS HIS INCOME DOES NT NECESSARILY LEAD TO A CONCLUSION THAT THE SAME WILL BE ALLOWED AS AN ELIGIBLE EXPENSE IN THE HANDS OF THE PAYER. IN OUR VIEW, MERELY CREDITING THE ACCOUNT OF SHRI SANJAY GUPTA A T THE YEAR END AND IN ABSENCE OF COMMENSURATE WITHDRAWAL OR THE PA YMENT BY THE ASSESSEE AND WHERE THE SAME FACTS HOLD GOOD EVE N FOR PAST AND THE SUBSEQUENT YEARS, THE INSTANT TRANSACTION I S IN ESSENCE A TRANSACTION OF SHARE IN PROFITS THOUGH TERMED AND R EFLECTED AS COMMISSION FOR SERVICES. SIMILARLY, WE NOTE THAT S IMILAR FACT PATTERN EMERGES IN RESPECT OF SMT. ANNU GUPTA FOR T HE INSTANT YEAR. HOWEVER, WE HAVE SAID ABOVE, WE HAVE NOTED AND EXAMINED THE FACTS ONLY FOR THE INSTANT YEAR AND IT IS IMPORTANT TO EXAMINE WHETHER SIMILAR FACT PATTERN EMERGES FOR TH E OTHER YEARS WHERE THERE IS INVOLVEMENT OF THESE TWO INDIVIDUALS IN ASSESSEES BUSINESS AND IN ABSENCE OF THAT, THE MATTER CANNOT BE DECIDED CONCLUSIVELY. IN LIGHT OF THE SAME, THE VARIOUS OT HER CONTENTIONS SO RAISED BY THE LD AR ARE THEREFORE NOT COMMENTED UPON AND ARE THUS KEPT OPEN. WE DEEM IT APPROPRIATE TO REMAND T HESE TWO MATTERS RELATING TO COMMISSION BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHALL EXAMINE THE MATTER A FRESH TAKING INTO CONSIDERATION THE ABOVE DISCUSSION AFTER GIVING REA SONABLE OPPORTUNITY TO THE ASSESSEE. M.A. NO. 32/JP/2019 SHRI ANIL KUMAR GUPTA, JHUNJHUNU VS. ITO, JHUNJH UNU 7 3. WE THEREFORE FIND THAT THE FINDINGS OF THE BENC H ARE BORNE OUT OF APPRECIATION OF FACTS ON RECORD AND WE THEREFORE DO NOT FIND ANY MISTAKE APPARENT FROM RECORD WHICH CALL FOR RECTIFICATION U /S 254(2) OF THE ACT. THE MISC. APPLICATION SO FILED BY THE ASSESSEE IS H EREBY DISMISSED. IN THE RESULT, MISC. APPLICATION FILED BY THE ASSES SEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/08/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 09/08/2019. * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI ANIL KUMAR GUPTA, JHUNJHUNU 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-1, JHUNJHUNU 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {M.A NO. 32/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR