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Income Tax Appellate Tribunal, MUMBAI BENCH “ B”, MUMBAI
आदेश/ ORDER
This appeal by the assessee is directed against the order of Principal Commissioner of Income Tax -1, Mumbai (in short ‘ the PCIT’) dated 24/03/2021 passed under section 263 of the Income Tax Act, 1961 ( in short ‘ the Act’) for the Assessment Year 2016-17.
Shri Subhash Shetty appearing on behalf of the assessee submitted that the case of the assessee was selected for scrutiny under CASS. During
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assessment proceedings the Assessing Officer issued questionnaire alongwith the notice u/s 142(1) of the Act dated 19/09/2018. A specific query was raised by the Assessing Officer regarding the details of commission paid. In response to said notice the assessee furnished reply giving the details as sought including the details of the commission paid. Thus, the Assessing Officer examined the entire issue with regard to the payment of commission and thereafter, having satisfied with the documents and explanation submitted accepted payment of commission and passed the assessment order for the impugned assessment year 2016-17. Thereafter, the PCIT invoked revisional powers u/s.263 of the Act on the ground that the Assessing Officer has failed to verify genuineness and reasonableness of the services claimed to have been rendered by associate concern of the assessee and the amount paid thereof as sales commission. The assessee in response to the aforesaid notice pointed that in Assessment Year 2012-13 the Assessing Officer had made complete disallowance of commission paid to the same associate concern and other parties. In first appellate proceedings, the CIT(A) decided the issue in favour of assessee company and allowed payment of commission in full. Thereafter, the Revenue agitated the issue in appeal before the Tribunal in ITA No.2232/Mum/2017. The Tribunal vide order dated 11/05/2018 dismissed appeal of the Revenue. The Revenue filed miscellaneous application in M.A.No.751/Mum/2018 before the Tribunal. The said M.A of the Revenue was also dismissed vide order dated 13/11/2019. Thereafter, in Assessment Year 2015-16 the Assessing Officer allowed assessee’s claim of payment of commission to associate concern i.e. M/s. Toshbro Controls Pvt. Ltd. The PCIT exercising his revisional jurisdiction
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u/s.263 of the Act held that the Assessing Officer has failed to make necessary queries to examine the claim made by assessee. The assessee assailed the order of PCIT u/s. 263 of the Act in ITA No.1765/Mum/2020. The Tribunal vide order dated 28/09/2021 quashed the order passed by PCIT u/s. 263 of the Act and allowed appeal of the assessee. The facts in Assessment Year under appeal are identical to the facts in Assessment Year 2012-13 and Assessment Year 2015-16. The nature of transactions are identical and the associate concern to whom commission is paid is the same. The ld. Authorized Representative for the assessee asserted that the PCIT has erred in coming to the conclusion that the Assessing Officer has failed to examine the issue and has passed the impugned assessment order without making enquiries and hence, the assessment order is erroneous and prejudicial to the interest of Revenue.
Per contra, Shri Mahesh Akhade representing the Department vehemently supported the order passed by the PCIT u/s. 263 of the Act. The ld. Departmental Representative submitted that the Assessing Officer merely collected the material during the course of assessment proceedings for Assessment Year 2012-13 and 2014-15 and no further enquiries were made by the Assessing Officer thereafter. The assessee has failed to substantiate role of Toshbro Controls Pvt. Ltd. in sales. The ld. Departmental Representative further pointed that the Department has already field appeal before the Hon'ble High Court against the order of Tribunal for Assessment Year 2012-13. The ld. Departmental Representative prayed for upholding the impugned order and dismissing appeal filed by the assessee.
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Both sides heard, orders of authorities below examined. During the period relevant to assessment year under appeal the assessee has paid commission to the tune of Rs.1,17,91,507/- to M/s. Toshbro Controls Pvt. Ltd. an associate concern of the assessee. The commission has been paid by the assessee to M/s. Toshbro Controls Pvt. Ltd. in accordance with the agreement dated 16/01/2012 ( at page 87 of the Paper Book). During the course of assessment proceedings the Assessing Officer had issued notice u/s 142(1) of the Act dated 19/09/2018(at pages 28 and 29 of the Paper Book), wherein a specific query was raised with regard to the details of the commission paid. The assessee in response to said notice made submissions and furnished details of the commission paid including commission paid to M/s. Toshbro Controls Pvt. Ltd. an associate concern of the assessee. Ostensibly, the Assessing Officer after examining the details furnished by the assessee including the details of the commission paid passed the assessment order. Though in the assessment order dated 12/12/2018 there is no discussion about the payment of commission or the enquiries made regarding payment of commission, but , that does not mean that the Assessing Officer has not applied his mind on documents submitted by the assessee. The Assessing Officer after having examined the documents was since, satisfied regarding assessee’s claim of payment of commission, hence, accepted the same. It would be relevant to mention here that in Assessment Year 2012- 13 similar disallowance in respect of payment of commission to M/s. Toshbro Controls Pvt. Ltd. was made by the Assessing Officer. The assessee carried the issue in appeal before the CIT(A). The assessee’s claim was allowed by the first appellate authority. The Revenue thereafter, challenged the order of CIT(A)
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before the Tribunal in ITA No.2232/Mum/2017(supra). The Co-ordinate Bench dismissed the ground raised by the Revenue with respect to payment of sales commission by observing as under:
“5. We have heard the rival submissions, perused the orders of the authorities below. On a perusal of the Assessment Order, we find that the Assessing Officer disallowed sales commission paid to M/s. Toshbro Controls Pvt. Ltd. mainly on two grounds firstly the parties through whom M/s. Toshbro Controls Pvt. Ltd. made sales have stated that they have received material directly from the assessee company and M/s. Toshbro Controls Pvt. Ltd. is a loss making company and therefore he was of the view that in order to see that there is no tax incidence, the profits were shifted to the loss making company by the assessee and therefore the commission is not allowable. The Ld.CIT(A) considering the submissions of the assessee deleted the disallowance observing that the recipient company is a loss making company and is not a ground for disallowance of commission. He also accepted the submissions of the assessee that M/s. Toshbro Controls Pvt. Ltd. is known to customers by its flag ship company and may not be aware of the subsidiary company and therefore the customer might have stated that they have got materials directly from the assessee company M/s. Nova Controls Pvt. Ltd. which is the flag ship company. 6. We further find from the details that similar commission has been paid to M/s. Toshbro Controls Pvt. Ltd., during the Financial Years 2007-08 to 2014-15 and the percentage of total sales made through the M/s. Toshbro Controls Pvt. Ltd. by the assessee ranges from 58.30% to 78.78% and the commission paid ranges between 11.57% and 18.83% depending upon the percentage of sales to total sales. We find that that the Revenue has accepted the payment of commission in all the earlier years and disallowance was made only during this year and based on an apprehension that the sister concern is making loss and therefore assessee tried to shift the profits, this fact is not proved beyond doubt. When the commission paid by the assessee is accepted in all earlier years there is no reason why it should not be accepted during the Assessment Year under appeal. In the circumstances, we do not find any infirmity in the order passed by the Ld.CIT(A) in allowing the claim of the assessee. Hence the order of the Ld.CIT(A) is sustained on this issue.” 5. In Assessment Year 2015-16 the Assessing Officer accepted assessee’s claim of payment of commission. The PCIT invoked revisional jurisdiction u/s 263 of the Act to dislodge assessee’s claim of payment of commission to M/s. Toshbro Controls Pvt. Ltd. on the ground that the Assessing Officer has failed to examine genuineness and reasonableness of large commission paid by the assessee to M/s. Toshbro Controls Pvt. Ltd. The assessee challenged the order passed by PCIT u/s 263 of the Act before the Tribunal in ITA No.1763/Mum/2020(supra). The Co-ordinate Bench after examining the facts
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of the case and also placing reliance on the decision of Tribunal in assessee’s own case for Assessment Year 2012-13 quashed the order of PCIT passed u/s 263 of the Act for Assessment Year 2015-16. The assessee has been paying commission to M/s. Toshbro Controls Pvt. Ltd. since long. Initially the Revenue has been accepting payment of such commission, thereafter, in Assessment Year 2012-13 the Assessing Officer rejected assessee’s claim which was subsequently allowed by the CIT(A) and the order of CIT(A) was upheld by the Tribunal. In the impugned assessment year the Assessing Officer has made enquiries with regard to payment of commission by the assessee as is evident from the documents furnished by the assessee in the Paper Book. It is not a case of lack of enquiry. We are of considered view that the twin mandatory conditions as set out in section 263 of the Act i.e. assessment order should be erroneous and prejudicial to the interest of Revenue are not concurrently satisfied in the instant case. Hence, the PCIT has erred in assuming revisional jurisdiction u/s 263 of the Act. The impugned order is quashed and the appeal by assessee is allowed.
Order pronounced in the open court on Wednesday the 16th day of February, 2022.
Sd/- Sd/- (G.S.PANNU) (VIKAS AWASTHY) अ�य�/ PRESIDENT �या�यक सद�य/JUDICIAL MEMBER मुंबई/ Mumbai, �दनांक/Dated 16/02/2022 Vm, Sr. PS(O/S)
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��त�ल�प अ�े�षतCopy of the Order forwarded to :
अपीलाथ�/The Appellant , 2. ��तवाद�/ The Respondent. 3. आयकर आयु�त(अ)/ The CIT(A)- 4. आयकर आयु�त CIT 5. �वभागीय ��त�न�ध, आय.अपी.अ�ध., मुबंई/DR, ITAT, Mumbai 6. गाड� फाइल/Guard file.
BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai