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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 568/JP/2017
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 568/JP/2017 fu/kZkj.k o"kZ@Assessment Year :2013-14 cuke Shri Ashok Kumar Mantri Income Tax Officer, Kishangarh Vs. Ward-1 Kishangarh LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAVPM6010F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Sanjay Jhanwar jktLo dh vksj ls@ Revenue by : Shri J. C. Kulhari (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 17/09/2018 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 01/10/2018 vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M.
This is an appeal filed by the assessee against the order of ld. CIT(A), Ajmer dated 06.04.2017 for A.Y. 2013-14 wherein the assessee has taken following two grounds of appeal. “1. Under the facts and circumstances of the case, the ld. Commissioner of Income Tax (Appeal), Ajmer has erred in confirming the addition of Rs. 1,84,532/- made by the ld. AO on account of interest paid on unsecured loans. The ld. CIT(A) failed to appreciate the fact that the said loan was utilized for investment in partnership firm from which the assessee earned remuneration and interest on capital.
2 ITA No. 568/JP/2017 Shri Ashok Kumar Mantri, Kishangarh Vs. ITO, Kishangarh
Under the facts and circumstances of the case, the ld. Commissioner of Income Tax (Appeal), Ajmer has erred in confirming the addition of Rs. 3,12,000/- made by the AO on account of payment of commission to Shri Ashish Mantri, son of the appellant.”
At the outset, it is noted that the appeal was earlier dismissed by the Co-ordinate Bench vide its order dated 19.12.2017 for non-prosecution and subsequently, the Co-ordinate Bench vide its order dated 13.04.2018 has recalled the earlier order. Hence, the present appeal has come up for hearing before us.
Regarding Ground No. 1 wherein the AO has disallowed interest paid on unsecured loan, the ld. AR has contended that the assessee has earned remuneration from M/s Shree Maheshwari Marble and interest from M/s Mantri Marble Industries wherein he is a partner and since the loan was invested in the partnership firm, interest and remuneration earned from such firm was offered to tax. Therefore, the interest expense to the extent should be allowed. In support, reliance was placed on the decision of the Co-ordinate Bench in case of ACIT vs. Novel Enterprises [2012] reported in 22 taxmann.com 116) and Delite Enterprises (P.) Ltd. v. Income Tax Officer, Ward 3(1)(2), Mumbai [2008] reported in 22 SOT 245.
It was further submitted by the ld. AR that while filing the return of income, the assessee has wrongly claimed the interest paid on unsecured loan under the head “income from other sources”. However, during the course of assessment proceedings, it was submitted that the
3 ITA No. 568/JP/2017 Shri Ashok Kumar Mantri, Kishangarh Vs. ITO, Kishangarh
same should be allowed as the funds were being used for investing in partnership firm wherefrom the assessee has earned interest and offered the same under the head “business income”.
In order to appreciate the contentions so advanced by the ld. AR, on perusal of the assessment order, it is noted that the Assessing Officer has observed that no evidence has been submitted by the assessee to prove the nexus of loan vis- a- vis the investments made in the partnership firm. Accordingly, he disallowed the said claim of the assessee. Further, during the course of appellate proceedings before the ld. CIT(A), he has again stated that the assessee could not substantiate his argument that interest was paid in respect of loan utilized for making investment in the partnership firm and no fund flow statement was filed which shows interest bearing fund, if any were utilized for making investment in the partnership firm. In absence of any nexus being established by the assessee in support of his contention that the borrowed funds have been utilized for making investment in the partnership fund, we accordingly do not see any infirmity in the order of the lower authorities. Further, we have gone through the decisions relied upon by the ld AR and find that the same does not support the case of the assessee as the same were rendered in their peculiar facts and circumstances of the case. In the result, ground no. 1 of the assessee’s appeal is dismissed.
In ground No. 2 regarding disallowance of commission paid to the assessee’s son Mr. Ashish Mantri, the ld. AR has contended as under:-
4 ITA No. 568/JP/2017 Shri Ashok Kumar Mantri, Kishangarh Vs. ITO, Kishangarh
“1. In this regard we may submit that the appellant got the work from M/s Tileco Pvt. Ltd., for export of marble blocks to Guangdong Yunfu zingyun foreign. China. The appellant outsource such work to Mr. Ashish Mantri who was having knowledge of import export matters. The facts have been confirmed by Mr. Ashish Mantri. The appellant received commission of Rs. 4,16,000/- from M/s Tileco Pvt. Ltd. and claimed the commission of Rs. 3,12,000/- which he paid to Mr. Ashish Mantri and net amount was offered to tax. Thus such expenditure is incurred in the nature of business. As per the provision of section 57 of the Act, “the income chargeable under the head “Income from Other Source “shall be computed after making the following deductions namely: (iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income.
Since the income from commission was offered to tax thus the expenses related to this has to be allowed. Further in respect of non presence of Mr. Ashish Mantri, we would like to submit that the assessee has given appropriate details in the form of account confirmation, affidavit, journal voucher, financial statements and passport of Mr. Ashish Mantri to show his identity. Thus the assessee has discharged his onus and merely non-presence of the party would not lead to an interpretation that the transaction is non-genuine. Evidence has also been given regarding Mr. Ashish Mantr’s visit to China during the relevant period. Though the visa is for Tourist purpose, however, he went for business purpose only which is a regular practice.
5 ITA No. 568/JP/2017 Shri Ashok Kumar Mantri, Kishangarh Vs. ITO, Kishangarh
In this regard, we referred to the findings of the Assessing Officer which are contained at para 4.2 which is reproduced as under:-
“4.2 Disallowance of Other expenses:-
Against the commission income of Rs. 4,16,000/- the assessee has claimed expenses under the head other expenses of Rs. 3,58,500/-. The assessee was asked to furnish details of this expenditure. The AIR furnished Profit & Loss A/c which reflected that expenditure amounting to Rs. 3,12,000/- was incurred as commission payment, Rs. 24,000/- as salary and Rs. 22,500/- as traveling expenses. (312000 + 24000 + 22500 = 358500). It was noticed that a sum of Rs. 312000/- was claimed to be paid to his son Shri Ashish Mantri as Commission against earning commission income. The assessee was asked to substantiate his claim and produce Shri Ashish Mantri for verification. The assessee furnished his reply through his A/R on 1/12/2015 stating as under:-
“With reference to above cited subject assessee is submitting as under:- 1. That during the year under assessment assessee has received commission for Rs. 416000/ from Tileco Private Limited, Jaipur for export of marble blocks to Guangong Yunfu Zingyun foreign, and China. 2. That during the course of export transaction with Tilexo Private Ltd. and party of China assessee has contact to Mr.
6 ITA No. 568/JP/2017 Shri Ashok Kumar Mantri, Kishangarh Vs. ITO, Kishangarh
Ashish Mantri and offered commission for this export transaction and to visit to china to contact from party of China.
That after discussion for this export transaction Mr. Ashish Mantri visited to China and deal the export transaction. That Mr. Ashish Mantri is having valid passport bearing No. H6805959 copy enclosed, and having knowledge of import export matters. That after completion of export transaction assessee has paid the commission for Rs. 312000/- to Mr. Ashish Mantri for the export transaction.
That Ashish Mantri is existing assessee of income Tax and he has shown the income from commission in his return of income which was received from assessee, copy of return of income, Balance sheet of Ashish Mantri for the assessment year 2013-14 is enclosed herewith.
Therefore, it is proved from the above evidence, details, and documents that commission which was paid to Ashish mantra is genuine and justified.”
There was a contradiction in the nature of work for which commission was granted, as M/s Tileco Private Limited confirmed the fact that commission was paid to Shri Ashok Mantri (the assessee) for helping them in purchase of marble block which was exported to China. However, the story of the assessee reflected that all affairs at China were managed by his son Shri Ashish Mantri and thus commission was paid to him. Looking to
7 ITA No. 568/JP/2017 Shri Ashok Kumar Mantri, Kishangarh Vs. ITO, Kishangarh
this contradiction, the assessee was asked to produce the copy of passport. It was noticed that the visa/passport reflect the purpose of visit to China during this F.Y. as 'F'. F visa is issued to those who intend to go to China for research. lecture, scientific, cultural exchange and study tour. Thus, it is a non-commerical visa. The AR was asked to produce Shri Ashish Mantri for verification. Despite repeated requests from 1/12/2015, Shri Ashish Mantri was not produced and es affidavit was produced on 28/12/2015. Shri Ashish Mantri was the son of the assessee and in touch with the assessee at his ancestral village Kuchaman City from where the affidavit was prepared. The claim of the assessee that tax was paid on commission income by Shri Ashish Mantri was also examined and it was noticed that the assessee would have been assessed in higher tax slab if the commission income is not diverted to his son.” 8. Further, we refer to the findings of the ld. CIT(A) which are contained at para 5.3 of his order which is reproduced as under: “5.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. It is seen that either during the course of assessment proceedings or appellate proceedings, the assessee has not been able to show that Shri Ashish Mantri, the son of the appellant has rendered any services for getting the commission of Rs. 3,12,00/-. The AO requested the appellant to produce Shri Ashish Mantri for examination, but the appellant could not produce Shri Ashish Mantri for examination, but the appellant could not
8 ITA No. 568/JP/2017 Shri Ashok Kumar Mantri, Kishangarh Vs. ITO, Kishangarh
produce Shri Ashish Mantri before the AO. The reason for disallowance in detail has been discussed by the AO at page 7 and 8 of the assessment order. In view of the facts discussed by the AO in the assessment order. I am of the considered view that the AO has rightly disallowed the commission expenses of Rs. 3,12,000/- paid by the appellant to Shri Ashish Mantri the son of the appellant. Accordingly, the disallowance of Rs. 3,12,000/- made by the AO is hereby confirmed.”
We have heard the rival contentions and perused the material available on record. In absence of demonstrating through verifiable evidence that Shri Ashish Mantri has rendered the service in connection with earning of the commission income by the assessee and in absence of the necessary nexus between the earning of income and rendering of services, we do not see any infirmity in disallowance of the commission payment to Mr Ashish Mantri and confirm the findings of the authorities below which remain uncontroverted before us. In the result ground No. 2 of the assessee is dismissed.
In the result, appeal filed by the assessee is dismissed. Pronounced in the Open Court on 01/10/2018.
Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vijay Pal Rao) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 01/10/2018.
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