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Income Tax Appellate Tribunal, KOLKATA BENCH “A”, KOLKATA
ORDER
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER This appeal filed by the assessee against the order dated 08.02.2016 passed by CIT(A)-13, Kolkata for AY 2010-11.
The only issue is to be decided as to whether the CIT(A) is justified in confirming the addition made by the AO on account of payment of commission in the facts and circumstances of the case.
Brief facts of the case are relating to the issue on hand that the assessee conducts its business under the name and style of M/s. Atindra Steel Company. The assessee filed its return online declaring total income of Rs.86,75,039/-. In response to the notice u/s 143(2) & 142(1) the Income Tax Act, 1961 (in short “Act”), authorized representative appeared and filed required evidences as sought by the AO. The AO disallowed an amount of Rs.13,60,869/- on account of commission payment to M/s. Wise Agencies Pvt.Ltd.
It is noted from the record in explanation to the AO’s objection, the assessee stated that commission @ 5% was paid to M/s. Wise Page | 1 (ASSESSMENT YEAR-2010-11) Agencies Pvt.Ltd. and such payments were made through banks duly deducting TDS. The AO held the submissions of assessee not tenable and added that amount to the total income of the assessee.
In the first appeal before the CIT(A), same arguments were advanced. The CIT(A) held that submissions of PAN card and registration certificate are not sufficient to prove the genuineness of commission payment. The assessee did not take steps in bringing the concerned persons of M/s. Wise Agencies Pvt.Ltd. for verification and confirmed the order of AO as under:-
Perusal of submission shows that appellants has placed reliance over the decision of Honourable lTAT KOK. in case of Ashok Kumar Agarwal. Wherein the fact of the referred case is that, lower TD5 deduction was submitted by the commission agent and those entire commission agents were traceable. In this case the facts of the case are different and it is seen that this So called commission agent M/s Wise Agency Pvt. Ltd is not traceable from various authorities i.e. Bank, Central Exose and by Income Tax too. In this case the assessing officer of M/s Wire agency i.e.ITO,Wd-7(2), Kolkata, itself has examined the issue and found that the so called agent is entry provider, nonexistent, untraceable and bogus, On being question to the appellant to prove the services genuine, by the AO, the appellant failed to do so. Here two facts are corroborated (i). The AO of M/s Wire agency found the concern as entry provider bogus and non extant, ii) The assessing officer of the appellant gave opportunity to produce and prove the services rendered which appellant failed to do so. The appellant also failed to show that the person M/s Wise Agency has shown concerned commission in his income. It is also not the case that this commission has been paid to the agent and the same has been allowed in past to the same person. It was also found by the AO that the concerned M/s Wise Agency was indulged in providing bogus entries to various concern. The appellant also failed to produce before the AO to the agents to get the commission agents examined, for rendering of its services. Even during the appellate proceeding no attempt has been made to produce the aforesaid concern persons for examination of detail. Only PAN Card and registration certificates has been submitted. The services rendering by MI5 Wise agendas are not proved particularly keeping in view that the concern and related persons itself are not traceable. The submission of PAN or ROC certificate merely shows documentary existence of the commission agent M/s Wise agency Pvt.Ltd. Similarly payment of commission through cheque and TDS is documentation done by the appellant. Had it been true then what prevented the appellant to produce the agent for examination for his services before the AO. Considering the above facts of the case the addition made by the AO is hereby confirmed. The case law cited by the appellant are factually different. The appeal of the appellant is dismissed.
Before us, Ld.AR submitted a Paper Book containing 66 pages. He referred to para 4 of the impugned order and submitted that the (ASSESSMENT YEAR-2010-11) addition made by the AO and confirmed by the CIT(A) only on the ground that no reply was received by M/s. Wise Agencies Pvt.Ltd. in response to the proceedings u/s 133(6) of the Act. He referred to page No.51 of the Paper Book and submitted that the Directors of the said company was resolved to make an application to the Registrar of the Company, West Bengal to strike the name of the Company off the registrar. He argued when the company passes resolution to strike off its name from the Registrar of companies which is evident from the record, there is no point in making the additions in the hands of the assessee for non-verification of details from the said M/s. Wise Agencies Pvt.Ltd. Further he submits that the assessee has given every detail before the AO i.e. copies of accounts, copies of bills, resolution dated 19.11.2011, certificate u/s 191 of the Act, copy of Agreement etc. But, however, both the authorities below ignored the same. The Ld.DR relied on the order of AO & CIT(A).
Heard both parties and perused material available on record. According to AO, the assessee failed to bring concerned persons for verification in the proceedings u/s 133(6) of the Act. But, however, the fact remains admitted that the assessee filed all details relating to the transactions that have taken place with M/s. Wise Agencies Pvt.Ltd. before the AO. Even the resolution passed by the Directors to strike off its name off register before the Registrar of companies. Form FTE placed at pages 52 to 54 an application seeking striking off was filed on 02.11.2011 and it is clearly shows that was well before date of assessment order. It is also not disputed that all the payments were paid through banking channel i.e. Account Payee cheques by deducting TDS evidence of which is placed at pages 61, 62 & 55 of paper book. Supporting the agreement between the assessee and M/s. Wise Agencies Pvt.Ltd. was fled which is at page No.56 of Paper Book clearly shows that an agreement entered in respect of telecom companies namely Airtel, Aircel, Tata, Vodafone, Reliance and power cable, CESC and others by the assessee as first Page | 3 (ASSESSMENT YEAR-2010-11) party and the second party therein i.e. M/s. Wise Agencies Pvt.Ltd. shall arrange permission and to help and resolve any problem arising in the site work. The first party i.e. the assessee agreed to pay 5% as commission for providing the services by the second party. Therefore, it is clear that there was an agreement between the assessee with M/s. Wise Agencies Pvt.Ltd. for which the assessee paid commission @ 5 %. We find that both the authorities did not examine and discuss the evidence filed by the assessee. Therefore, the finding of both the authorities below that the transactions between the assessee and M/s. Wise Agencies Pvt.Ltd. are bogus and not genuine which is in our opinion contrary to the evidence brought on record by the assessee.
Coming to the decision as relied on by the Ld.AR in the case of CIT vs M/s. Inbuilt Merchant Pvt. Ltd. [2014] (3) TMI 1107 of Hon’ble High Court of Calcutta wherein we find the AO held the transactions were not genuine as there was no reply in some cases and found no existence of such agents during the verification proceedings. The Hon’ble High Court of Calcutta held that no addition is maintainable for non-receipt of any reply and non-existence of the parties therein. We find in the said case, the payments were made by cheque after deduction of tax and other evidences like details of depositing TDS and details of recipient were duly furnished. In the present case, the Ld.AR placed on record relevant evidence from pages 44 to 66 of which we discussed in the aforementioned paragraph. Therefore, transactions between the assessee and M/s. Wise Agencies Pvt. Ltd. cannot be said imaginary and bogus. Therefore, the ratio laid down by the Hon’ble High Court of Calcutta in the case of M/s. Inbuilt Merchant Pvt. Ltd.(supra) is clearly applicable to the facts on hand. Thereby, the addition made by the AO and as confirmed by the CIT(A) is not maintainable. The relevant portion of observations of Hon’ble High Court of Calcutta in the case of M/s Inbuilt Merchant Pvt. Ltd. (supra)is reproduced hereunder for ready-reference:- Page | 4 (ASSESSMENT YEAR-2010-11)
The views expressed by the Assessing Officer are erroneous in law. The Assessing Officer has overlooked the importance of the books of accounts maintained in the ordinary course of business. Reference in this regard may be made to sub-section (2) of Section 32 of the Indian Evidence Act, 1872. The books of accounts maintained in the ordinary course of business are relevant and they cannot be discarded in the absence of appropriate reasons. The mere fact that recipient did not reply in some cases or they were not found at the address furnished by the assessee does not in the least prove the fact that they were non existent or that the payments shown to have been made by the assessee were imaginary. With the advancement of technology, it has become possible to sell goods throughout the country through the internet. For that purpose, agents are required throughout the country. The mechanism in that regard has been disclosed by the assessee and has been recorded in the order of the CIT (Appeals). For the purpose of carrying on its business, the assessee has to recruit the agents. It may not be possible for the assessee to know them personally. Whatever address was furnished to the assessee, has been disclosed to the Income-tax Department. Payments were admittedly made by cheque after deduction of tax. The tax deducted as source has duly been deposited. The judgment in the case of CIT vs. Precision Finance Pvt. Ltd. reported in 208 ITR 465 relied upon by Mr. Bhowmick does not really assist him. The aforesaid judgment is an authority for the proposition that mere payment by account payee cheque cannot establish that the transaction was genuine, but in the case before us, besides the fact that payment was made by cheque, there are other pieces of evidence available which are as follows: a) Books of Accounts maintained by the assessee in the ordinary course of business; b) Deduction of Tax at source; c) Deposit of the money deducted at source; d) Particulars of the recipient were duly furnished; We are, as such, of the opinion that the views expressed by the learned Tribunal are unexceptionable. We, therefore refuse to admit the appeal. The appeal is thus dismissed.
Further, we find the CO-ordinate Bench of this Tribunal in the case of Rahul Khera vs ITO [2018] (9) TMI 784 placed reliance in the case of M/s. Inbuilt Merchant Pvt. Ltd.(supra) and held no addition is maintainable when all the payments were made through account payee cheques and the details of purchase bills, sales tax No. and transport documents were on record. The relevant portion is reproduced hereunder for ready-reference:-
ITA No.1304/Kol/2016 (ASSESSMENT YEAR-2010-11) 16. “The commission claimed to have been paid to M/s. Govardhan Nirman Pvt Ltd was for purchase of Scrap from M/s Jessop and Co. Ltd. The AO has issued notice U/s. 133(6) to M/s Jessop and Co and we note that the said Jessop replied to the notice. The AO however doubted the reply by Jessop on the ground it was a reputed company so the logo in the letter-head should have been in different colors etc which action of AO cannot be countenanced. We note that the AO has disallowed the commission simply on surmises without bringing any evidence on record to the contrary but on presumption that the Jessop companies building was in dilapidated condition etc or that the telephone made by the AO was not picked up by the employee of Jessop Co. Ltd cannot be a ground for disallowing the commission. Furthermore, we note that the parties to whom commission was paid were not relatives of the assessee. There is no evidence that the commission paid has come back to the assessee. Our attention was drawn to the following cases wherein it has been held that if there is no evidence to show that the agents were relatives of the assessee and that the commission paid has not come back to the assessee, then it cannot be said that the commission paid was not genuine. For the said proposition we rely on the Judgment of the Hon'ble Kolkata High Court in the case of Commissioner of Income Tax Vs Inbuilt Merchants Pvt Ltd in ITAT No. 225 of 2013, GA No. 2825 of 2013 wherein it was taken note by the Hon'ble High Court that with the advancement of the Technology it has become possible to sell goods throughout the country through Internet and for this purpose agents are required throughout the country and so the assessee has to recruit the agents. The Hon'ble High Court took note that it may not be possible for the assessee in such cases to know them personally. And since the assessee has furnished the address of the agents which they have provided to the assessee to the AO and payments were admittedly made by cheque after deduction of Tax, the Hon'ble High Court after taking note that apart from the payment by cheque there were other evidence like (a) Books of account maintained by the assessee in ordinary course of business. (b )Deduction of tax at source.(c )Deposit of the money deducted at source (d)Particulars of the recipient were duly disclosed. Accordingly, the Hon'ble Court confirmed the action of Tribunal allowing the commission paid to agent in that case and dismissed the departmental appeal. Similar view was taken by the Hon'ble High Court in the case of Alba Hydronics Pvt Ltd. by the Hon'ble Calcutta High Court in of 2004 holding that the revenue could not demonstrate either the money was not paid or the money paid was later routed back to the assessee. Hence the commission paid to agent was allowed. Similar view was taken in the case of Printer House by Hon'ble Delhi High Court reported in 188 ITR Taxman 70 wherein it was held that when there was no evidence that the commission was paid to relatives and family members and that there was no evidence that the commission paid has come back to the assessee no disallowance can be made. Similar view has also been taken in the case of Ambica Forging by Hon'ble Punjab & Haryana High Court that when there was no evidence that the commission was paid to relatives and the commission paid has come back to the assessee, no disallowance can be made. We note in the present case before us, the assessee had made all the payments to the parties from whom purchase was made by account payee cheques, the purchases made can be verified from the purchase bills, sales tax numbers and transport documents. The books of accounts were not rejected. We note that all the five parties to whom the assessee paid commission had submitted their copy of bill which contained their PAN details. Tax was deducted at source by the assessee and deposited with the Government. Summon u/s 133(6) were served on all the parties/agents, and all of them confirmed to have received the commission. Inspector deputed found the parties at the given address and also found that the companies are group companies of Mohan Motors (who are the biggest distributors of Motor Vehicles in Kolkata) and have wide range of connections Page | 6 (ASSESSMENT YEAR-2010-11) all over India. And all the five agents have duly included the income in their return of income and paid taxes thereon and that there was no evidence to show that the money has come back to assessee or the agents were related parties. Therefore, the service of the agents in the aforesaid facts and circumstances are for business purpose and therefore, the commission paid was a business expense and needs to be allowed as 'deduction' since it is of revenue nature and expended wholly and exclusively for the purpose of business and, therefore, the AO is directed to allow commission expenditure incurred by the assessee.”
In the light of the decisions of Hon’ble High Court of Calcutta & order of Tribunal, we find the addition made by the AO and confirmed by the CIT(A) is not maintainable and it is deleted. Thus, order of CIT(A) is set aside. Therefore, ground raised by the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 10.07.2019.