SAKSHI RAJAN GUPTA,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX , MUMBAI

It was also brought to the notice of the Ld. CIT(A) that the based on oral agreement between the assessee and her brother-in-law the commission income of approximate 95% was given to the HUF because the entire business of sale of products (insurance policies) of Tata AIA and ICICI Lombard was made by the HUF only through Shri Shatul Kamal Gupta. According to assessee, only because the commission agent was the relative (brother-in-law) the same could not have been disallowed. However, the Ld. CIT(A) observed that since the assessee has not objected before Ld. DRP against the draft assessment order within the 30 days after recipient of it, the AO has 4 A.Y. 2018-19 Sakshi Rajan Gupta rightly passed the final assessment order. And according to Ld. CIT(A) the assessee has been given proper opportunity by AO before passing the assessment order. And therefore according to Ld. CIT(A) there is no violation of natural justice. According to the Ld. CIT(A), the assessee has not filed any document to prove that the expenses claimed to have been incurred by the assessee (commission paid to HUF i.e. Shatul Kamal Gupta HUF); and the Ld CIT(A) wondered as to how the commission agent was an HUF and how service/sale of insurance policies could have been rendered by an HUF, when it could have been done only by an individual. Therefore Ld. CIT(A) confirmed the action of the AO. Aggrieved, the assessee is before us.

We have heard both the parties and perused the record. Undisputed facts are that the assessee is non-resident who is residing along with her husband at Dubai. She is a licensed agent of Tata AIA and ICICI Lombard. According to the assessee, she received an amount of Rs.30,65,782/- (commission) for the sale of insurance policies of both insurance companies. According to the assessee, the entire business of sale of insurance policies were carried out by the Shatul Kamal Gupta on behalf of HUF; and for that the assessee had paid 95% of the commission income i.e. Rs.28,79,641/-. Balance amount assessee offered/returned in her return as income for taxation Rs.1,70,194/-. The AO disallowed the expenses on the ground that the assessee was not able to bring any evidence to support the claim of expenses incurred to the tune of Rs.28,79,641/- i.e. the assessee failed 5 A.Y. 2018-19 Sakshi Rajan Gupta to bring on record any agreement with the commission agent Shri Shatul Kamal Gupta (HUF). The AO noted that the Shatul Kamal Gupta is the brother-in-law of the assessee. Taking into consideration the fact that assessee failed to file any agreement with HUF, and the since Shri Shatul Kamal Gupta was a close relative, the AO disallowed the expenses. On appeal, the Ld. CIT(A), was of the opinion that since the commission agent is an HUF, according to him service/sale of insurance policies could have been rendered only by an individual and not by HUF. Before us, assessee’s main grievance is that no proper opportunity has been granted to the assessee during the assessment proceedings. Further according to the Ld. AR, the assessee has filed the details of Shatul Kamal Gupta HUF and also brought to the notice of both the authorities that Shatul Kamal Gupta (HUF) has offered for taxation the amount which it received i.e. Rs.28,79,641/-. Therefore, according to the Ld. AR, if proper opportunity is granted then the assessee would be able to file relevant documents to substantiate that the payment of Rs.28,79,641/- was given for the services rendered by Shatul Kamal Gupta /HUF for effecting sale of the insurance policies of both Insurance Companies. According to us, assessee could not place before the AO, relevant document to substantiate the expenses incurred by the assessee, which is necessary for adjudication of the appeal. Therefore according to us, proper opportunity need to have been given to the assessee during assessment proceeding. So we restore the assessment back to the file of AO. For that we rely on the decision of the Hon’ble Supreme Court in the case of Tin Box 6 A.Y. 2018-19 Sakshi Rajan Gupta Company Vs. CIT (249 ITR 216) (SC), wherein it was held that if an assessee did not get proper opportunity before the AO, then the proper course is that assessment should be restored back to the file of AO for de-novo assessment. The Hon’ble Supreme Court in the case of Tin Box Company (supra) has held as under:- “ It is unnecessary to go into great detail in these matters for there is a statement in the order of the Tribunal, the fact-finding authority, that reads thus : "We will straightway agree with the assessee's submission that the ITO had not given to the assessee proper opportunity of being heard." That the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is the assessment order that counts. That order must be made after the assessee has been given a reasonable opportunity of setting out his case. We, therefore, do not agree with the Tribunal and the High Court that it was not necessary to set aside the order of assessment and remand the matter to the assessing authority for fresh assessment after giving to the assessee a proper opportunity of being heard.

Two questions were placed before the High Court, of which the second question is not pressed. The first question reads thus : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not setting aside the assessment order in spite of a finding arrived at by it that the Income-tax Officer had not given a proper opportunity of hearing to the assessee ?" In our opinion, there can only be one answer to this question which is inherent in the question itself: in the negative and in favour of the assessee.

The appeals are allowed. The order under challenge is set aside. The assessment orders, that of the Commissioner (Appeals) and of the Tribunal are also set aside. The matter shall now be remanded to the assessing authority for fresh consideration, as aforestated. No order as to costs.”

Before parting, we would like to make it clear that the Ld. CIT(A)’s reasoning that the services/selling of Insurance Policies could not have been rendered by HUF cannot be accepted. It is 7 A.Y. 2018-19 Sakshi Rajan Gupta common knowledge that the Karta of HUF and coparcenary’s are individuals and they can function on behalf of the HUF. Therefore, the aforesaid reason given by the Ld. CIT(A) for rejecting the claim of the assessee cannot be countenanced. Other than the aforesaid observation, we direct the assessee to file documents to substantiate that Shatul Kamal Gupta on behalf of HUF has rendered services (sale of insurance policies which fetched commission income for non-resident assessse) and for the services rendered by the Agent, the assessee has compensated the HUF (approximately 95% of the total commission assessee received) and claimed it as expenses. And in case before the AO if the assessee is able to file proof that the recipient of Rs.28,79,641/- has reflected the same as income; and the same has been taxed; and also able to show that Shri Shatul Kamal Gupta on behalf of HUF has rendered services for sale of insurance policies, then the expenses claimed to be considered by AO in accordance to law.