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Income Tax Appellate Tribunal, JAIPUR BENCHES “B”, JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 559/JP/2019
ORDER PER: SANDEEP GOSAIN, J.M. This appeal has been filed by the assessee against the order of the ld. CIT(A)-IV, Jaipur dated 07/02/2019 for the A.Y. 2009-10, wherein following grounds have been taken:
“1. That the ld. CIT(A)-IV went wrong in confirming the disallowance of commission payment of Rs. 3,00,000/- arbitrarily without dealing with the confirmation filed at the time of hearing of appeal, should be deleted. 2. That the ld. CIT(A)-IV went wrong in confirming the addition of Rs. 128723/- U/s 69 by treating the realization of the advance given to Shri Rohit Walter and Prabhu Kumar as unexplained cash introduced by the assessee in their name arbitrary and should be deleted.”
2 ITA 559/JP/2019_ Jaipur Boutique Carpet Vs ITO 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.
Brief facts of the case are that the assessee derived income from purchase and export of carpets. The assessee filed its return of income on 26/09/2009 declaring total income of Rs. NIL. The case of the assessee was selected for scrutiny and finally the A.O. passed assessment order U/s 143(3) of the Income Tax Act, 1961 (in short, the Act) dated 27/12/2011 at a total loss of at Rs. 15,99,375/-.
Being aggrieved by the order of the A.O., assessee carried the matter before the ld. CIT(A), who after considering the submissions of both the parties as well as material placed on record, dismissed the appeal of the assessee. Against which, the assessee is in further appeal before the ITAT on the grounds mentioned above.
Ground No. 1 of the appeal raised by the assessee relates to challenging the order of the ld. CIT(A) in confirming the disallowance of commission payment of Rs. 3,00,000/-. The ld AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and relied on the written submissions filed before the Bench and the same is reproduced below:
3 ITA 559/JP/2019_ Jaipur Boutique Carpet Vs ITO “In the case of Jaipur Gem Crafts which in a sister concern an addition of Rs.900000/- on the same grounds as mentioned in ii to iv. In appeal the CIT (A)- 5 Jaipur vide order dt.:-25.01.2017 has deleted the addition. See page 11 of the appellate order. (See P.B.Pg. No.3-14)
The AO has not discussed about the letter from T.C.I dt. 24/09/2011 filed with the submissions dt.:- 23/07/2015. Copies enclosed (See P.B.Pg. No.15-17)
From the above facts the addition of Rs. 300000/- is totally unwarranted and illegal.
The Learned CIT (A) reproduced the submissions made in appeal. (See page 9 & 10). In these submissions the assessee has filed the confirmation of T.C.I (See page 10 para 1) which was also filed before the ITO. In this confirmation T.C.I has confirmed that the amount of Rs. 1500000/- paid on 31.12.2007 & 01.06.2008 was for the year 2008-2009. It was not an additional evidence which required application under rule 45 of I. T. Rules. Thus, the assessing officer as well as the Learned CIT(A) without considering and making any comments on the confirmation disallowed a sum of Rs. 300000/- which is totally unwarranted and unlawful.
Therefore, it is prayed that the AO has considered the alleged agreement with Jaipur Gem Crafts not of the assessee. This agreement is not a legal document which is not enforceable in the court.”
On the other hand, the ld. DR has relied on the orders passed by the revenue authorities.
4 ITA 559/JP/2019_ Jaipur Boutique Carpet Vs ITO 7. We have considered the rival contentions and carefully perused the material available on record. From perusal of the record, we found that the assessee continued to derive income from purchase and export of carpets in this year as well as in the previous years and the assessee had shown/claimed disallowances of Rs. 15.00 lacs in the P&L account as commission on sales. Commission expenses have been shown in the name of Travel Corporation of India (in short, the TCI). According to assessee, the commission was paid to TCI as shopping commission to attract foreign tourists coming through TCI to the shop of the assessee. Enquiry U/s 133(6) of the Act were conducted from TCI and the assessee had also filed a letter on 28/11/2011 and submitted a copy of agreement executed between the assessee and the TCI and as per the details contained in the said agreement that the said agreement was operative for the period from 30/12/2007 to 31/03/2009. Further the assessee was to pay to TCI a non-refundable, non-adjustable, upfront signing fees of Rs. 15.00 lacs i.e. Rs. 5.00 lacs paid on 31/12/2007 and Rs. 10.00 lacs paid on 05/05/2008 and total Rs. 15.00 lacs was paid by the assessee to the TCI. Since the commission of Rs. 15.00 lacs was paid for the period of 15 months and out of which only 12 months relates to the year under consideration i.e. A.Y. 2009-10 and remaining 3 months relates to the preceeding assessment year, therefore, the A.O. disallowed proportionate
5 ITA 559/JP/2019_ Jaipur Boutique Carpet Vs ITO payment of Rs. 3,00,000/- for the period of 3 months which were falling in the preceeding assessment year and therefore added the same to the total income of the assessee. The said order of the A.O. was also confirmed by the ld. CIT(A) whereas as per the assessee it had submitted copy of agreement and vide letter dated 16/12/2011 it was categorically submitted by the assessee that the agreement entered into with TCI was a draft agreement and was not signed by both the parties. It was also submitted that the TDS was duly deducted and also filed confirmation letter of TCI wherein it was categorically stated that the entire amount of Rs. 15.00 lacs was for the F.Y. 2008-09 i.e. A.Y. 2009-10 but no further enquiries were carried out for the said confirmation of TCI. It was further submitted that the TCI vide letter dated 26/05/2015 had again confirmed that the contract was for A.Y. 2009-10. It was further submitted that an identical agreement was also executed between the TCI and the sister concern of the assessee namely M/s Jaipur Gems Crafts wherein in that case also additions were made on the same grounds but the ld. CIT(A)-5, Jaipur in the case of sister concern i.e. M/s Jaipur Gems Crafts had deleted the additions by holding as under:
“4.3. I have considered the facts of the case, the assessment order and the submissions of the appellant. The assessee has debited commission expenses of Rs, 45,00,0001- paid to M/s Travel Corporation of India Ltd. (TCIL) to the P&L account of the year
6 ITA 559/JP/2019_ Jaipur Boutique Carpet Vs ITO under consideration. The AO called for a copy of agreement from TCIL and as per the copy sent by them the commission amount of Rs. 45 Lacs pertained to the period from 30.12.2007 to 31.03.2009 i.e. for 15 months, out of which 12 months pertain to the year under consideration and balance 3 months pertain to the preceding year. The AO therefore disallowed the proportionate amount of Rs. 9 Lacs pertaining to the preceding year as prior- period expenses. The assessee had stated during assessment as well as appellate proceedings that the copy of agreement sent by TCIL was a draft only and as such was not signed by the assessee. The assessee further produced confirmation dated 23.11.2011 from TCIL stating that the amount of Rs. 45 Lacs was commission pertaining to FY 2008-09 on which the AO's interpretation is that .the amount of Rs. 45 Lacs was no doubt paid in FY 2008-09 but it still pertains to 15 months a s s t a t e d e a r l i e r . I h a v e g o n e t h r o u gh t h e c o p y o f a l l e ge d agreement and subsequent confirmation letter from TCIL as well as accounting of assessee of previous years for ascertaining the accounting practice and to check whether there was any double claim of the same commission expenses. Firstly, the alleged agreement is only a draft since it is not signed by both parties to the agreement. Secondly, in the confirmation letter from TCIL it is clearly stated that the amount of Rs. 45 Lacs is received by TCIL for the contract for the year 2008-09, which makes it amply clear that the, entire amount pertains to the year under consideration. Moreover, the balance-sheet as at 31.03.2008 shows the amount of Rs. 25,00,000/- paid on 31.12.2007, under the head "Brokerage on sales (Prepaid)", which again makes it clear that the said amount was paid in advance in FY 2007-08 and was hence treated as prepaid expense for that year and was not debited in the P&L account for 7 ITA 559/JP/2019_ Jaipur Boutique Carpet Vs ITO AY 2008-09. Further, such practice has been followed by the assessee across several years as seen from such prepaid commission appearing in balance-sheets of various years. Also, it is not the case of the AO that such expenses are non-genuine or there is double claim of same amount in different years. Considering the facts, the disallowance of Rs. 9,00,000/- is unfounded and is hereby deleted.” In this respect, the assessee had drawn our attention to the paper book filed by the assessee wherein copy of letter from TCI to ITO dated 24/09/2011 and 16/12/2011 has been placed on record. Apart from this, the assessee had also placed on record copy of order of ld. CIT(A) passed in the case of sister concern of the assessee namely M/s Jaipur Gems Crafts wherein under the identical circumstances, the additions were deleted.
Be that as it may, after considering the entirety of facts and circumstances of the present case, we found that while deciding this ground, the A.O. as well as the ld. CIT(A) has not considered the letter submitted by the TCI wherein the TCI had confirmed that amount of Rs. 15.00 lacs paid on 31/12/2007 and 01/06/2008 was for the F.Y. 2008-09 and had also not considered the decision of ld. CIT(A) in the case of sister concern of the assessee i.e. M/s Jaipur Gems Crafts wherein under identical circumstances, the additions were deleted. Considering the principles laid down by the Hon’ble Supreme Court in the case of 8 ITA 559/JP/2019_ Jaipur Boutique Carpet Vs ITO Kishanlal Chawla Vs State of Uttar Pradesh decided on 08/03/2021 wherein it was said that “every trial is voyage of discovery in which the truth is the quest”. Since in the income tax proceeding, the A.O. is considered as an adjudicator as well as investigator, therefore, it Was all the more duty of the A.O. to evaluate or consider all the documents placed on record by the respective parties. Therefore, considering the interest of justice, equity and fair play, we restore the matter back to the file of the A.O. for deciding the issue afresh after considering the letter submitted by the TCI wherein the TCI had confirmed that amount of Rs. 15.00 lacs paid on 31/12/2007 and 01/06/2008 was for the F.Y. 2008-09 and the decision of ld. CIT(A) in the case of sister concern of the assessee i.e. M/s Jaipur Gems Crafts wherein under identical circumstances, the additions were deleted.
Before parting, we may make it clear that our decision to restore the matter back to the file of the A.O. shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by A.O. independently in accordance with law.
Ground No. 2 of the appeal raised by the assessee relates to challenging the order of the ld. CIT(A) in confirming the addition of Rs. 1,28,723/- U/s 69 of the Act. In this regard, the ld AR has reiterated the same arguments as were raised before the ld. CIT(A) and also relied on 9 ITA 559/JP/2019_ Jaipur Boutique Carpet Vs ITO the written submissions filed before the Bench and the same is reproduced below:
“The Learned CIT(A) added a sum of Rs. 128723/- as unexplained income which was in reality the recoveries of advances given to Rohit Walter and Mr. Prabhu who were travel agent for bringing the customers at the show room.
The advances were given to them by account payee cheques. Since these persons could not give the desired results, the repaid the advances in small amounts saved by them out of their own earnings. They were not men of means.
The Learned CIT(A) arbitrarily assumed on surmises that whenever there was cash shortage in the books, the assessee used to deposit cash in these two persons account. No addition can be made on assumption. The assessee having turnover of Rs. 5145367/ -. As expenses by cheques what was the necessity to adopt such means. There used to be sufficient cash and bank balances. As and when need arise the assessee used to withdraw from the banks. Assessee will never adopt such illegal and unethical means. There was no shortage of cash. The CIT(A) before making such addition ought to have seen the cash book to find out that on the date of deposit of cash in these accounts was there any necessity to meet the expenses. As such without pointing out a single instance of this nature the addition is on presumption and surmises arbitrarily be deleted.”
On the other hand, the ld. DR has relied on the orders passed by the revenue authorities.
10 ITA 559/JP/2019_ Jaipur Boutique Carpet Vs ITO 12. We have considered the rival contentions and carefully perused the material available on record. From perusal of the record, we noticed that as per the A.O., on examination of the cash books of the assessee it was noticed that whenever there was shortage of cash, receipts below Rs. 20,000/- was shown by the assessee in the name of Rohit Walter and Prabhu Kumar. Whereas as per the assessee, the additions made on account of unexplained income made by the revenue authorities is unsustainable as in fact there are recoveries of advances given to Rohit Walter and Prabhu Kumar who were travel agents for bringing the customers at the show room of the assessee. It was categorically submitted by the assessee that since the said Rohit Walter and Prabhu Kumar could not deliver the required results, therefore, the advance which was paid by the assessee through account payee cheques was repaid by the said two persons in the small amounts out of their own earnings, but the revenue authorities rejected the said stand of the assessee on the ground that the assessee had not placed on record the confirmation, identity or residence proof of both the above persons i.e. Rohit Walter and Prabhu Kumar. As per the assessee, the said additions were made on the basis of assumptions and surmises as the assessee was having turnover of Rs. 51,45,367/- and the payment was made two these persons through cheque and the assessee was having sufficient
11 ITA 559/JP/2019_ Jaipur Boutique Carpet Vs ITO cash and bank balances and as and when some need arises to the assessee then in that eventuality the assessee used to withdraw cash from the bank and the revenue authorities have not seen or examined the cash book to find out that on the date of deposit of cash in these accounts, was there any necessity to meet the expenses. No such event/instance in this nature has been pointed out by the revenue rather the ld. CIT(A) in the operative portion of the order has mentioned that the A.O. had made additions as the necessary confirmation from the above two persons from whom the money was received as “temporary loan” were not produced. However, after examining the pleadings of both the parties, we have not found that at any stage, the assessee had ever claimed that they have received temporary loan from these two persons namely Rohit Walter and Prabhu Kumar, therefore, in such circumstances, we are unable to understand as to how the ld. CIT(A) had concluded that the assessee has received temporary loan from the above two persons. According to the assessee, there is some confusion on the part of the revenue in appreciating the facts of the present case. Therefore, considering the interest of justice, we also set aside this issue back to the file of A.O. with direction to decide the issue afresh after examining the cash book or any other documents as it deem fit for deciding this issue.
12 ITA 559/JP/2019_ Jaipur Boutique Carpet Vs ITO 13. Before parting, we may make it clear that our decision to restore the matter back to the file of the A.O. shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by A.O. independently in accordance with law.
In the result, this appeal of the assessee is allowed for statistical purposes only. Order pronounced in the open court on 16th April, 2021.
Sd/- Sd/- ¼foØe flag ;kno½ ¼lanhi x®lkÃa½ (VIKRAM SINGH YADAV) (SANDEEP GOSAIN) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 16/04/2021 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Jaipur Boutique Carpet, Jaipur. 1. izR;FkhZ@ The Respondent- The I.T.O., Ward 5(1), Jaipur. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 559/JP/2019) 6. vkns'kkuqlkj@ By order,
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