VIDHI MINERALS & ALLOYS PVT. LTD.,NAGPUR vs. ACIT, CIRCLE- 7, (NOW MEAGE WITH ASSTT. COMM. OF INCOME TAX, CIR-3), NAGPUR

188 IN THE INCOME TAX APPELLATE TRIBUNAL Nagpur Bench, Nagpur Before Shri P K Bansal, Vice President and Shri Pawan Singh, Judicial Member ITA No.444/NAG/2014 (Asseesment Year: 200g-10) M/s. Vidhi Minerals & CIT Circle 7 Alloys Pvl; Ltd, Aayakar Bhavan Vs. 579, Tarasa Road Nagpur Kanhan; Nagpur 441401 PAN AACCV4367G Appellant Respondent Appellant by: Shri Abhy Agarwal Respondent by: Shri Gitesh Kumar Date of Hearing: '21.11,2017 Date of Pronouncement: 23.11,.2017 QRDER Per Pawan Singh, JM This appeal under Section 253 of the Income Tax Act by the asses8e8 is directed against the order of the CIT(A)-II, Nagpur dated 16.06.2014 [or Y, 200g-10 The assessee ha8 raised the following grounds of appeal: and in the circumstances of the case the "{1) That On the facts leamed A.0. has erred in making disallowance of Rs,93,54,600/ - out of Commission Expenses and the leamed CIT (Appeals) has further erred in confirming the same Tnat on the facts 0f the case disallowance of Commission (21 of Rs.93,54,600/ - i5 unjustified, arbitrary and Expenses deserves to be deleted: 3 Briel facts of the case are that the assessee company engaged in the business of trading export and import of minerals and ores Fled its return of income for the relevant assessment year on 30.09.2009 declaring total income of <1,84,32,680/= The &8sessment Wa5 completed On 30,12.2011 under Section 143(3) of the Act. The AO while passing the assessment {1* o 444/Nag/ 2014 A; > Virlii Minerls & Aflys Put_ Ltd. 7 order disallowcd commission payment of <93,54,600/- On appeal before 1he CITIA} the action of the AO Was confirmed. Thus; further aggrieved by the ordcr af the CITIAI the assesscr has filed the present appeal before us_ 4 We have considered the rival submissions of the parties and perused the material on record, The learned A,R, for the asges8ce argued that the a33e980E company during the [inancial year paid commission to 38 persons of {1,03,02,752/-, The AQ allowed commission payment of {9,48,152/-only and the balance commission expenses Qf {93,54,600/- wes disallowed, During the assessment proceedings the asbes8ee provided all detail8, information and evidences to substantiate the genuineness of the commission paid during lhe relevant period: The as8es86e provided copy of the vouchers/credit notes; details of TDS made on commisgion along with TDS return, copy of bank statement showing commission payment through banking channels, income tax return and computation of come of some of the parties and the postal address of the parties. The AO pted 8 subjective criteria for allowing the deduction on commission on mission only of 89,48,152/ The other deduction was disallower in an axbitrary manner: The AO has not appreciated thc evidences nor gave his findings on various documentary evidences furnished during the assessment, The AQ issued summons to various parties on the back of the a83C8380_ The a55essee was inforned only vide show cause notice dated 29,12.2011 and asked to submit its reply by 30.12.20113 The AO passed the asgessment order on 30.12.2011_ The assessment order was passed in a hasty manner without giving any opportunity for making comment on the inquiry conducted by asgessing officer. The assessing officer has not given opportunity for cross examination of the commission agent whose statenent was aliegedly recorded by him- The a3se83ee requested to the AQ to furnish the statetent recorded by him. Even after passing the absessment order the a9sessce filed applications dated 08.11,2013 15.02.2016 and 25.05.2016. Further an application under the provisions of Right to Information Act was also filed on 21.03.2017. However, till date no response is received from the AO_ I was argued that even the learned ITA No. 444/2.W2014 M 5. Vidhi Milerals & Ailoy; Pu, Itd. Iro CIT(AP has nnt appreciated thc ubmission and various documentary evidences {urnishcd by the a55c3560. The CITIAJ erred in observing that nonc of the comrimiasion agents Wa8 produced beforc the AO_ The observations of the lcarned CIT(AJ ate incorrect, The ascs8c0 subiitted belore the lower authorities that due t0 payment of commission the sale of 298cs8EE was substantially increased from assessment year 2008-09 irom {3, 15,00,043/ - 10 {41,11,28,278/- in A.Y . 2009-10 (a8ses3ment year under considerationj: The commission agents procured suflicient business to the as8esse8 _ The assesgee has shown nct profit of 4.18%/ in A.Y. 200g- 10 which is higher than the subsequenl assessment yeats In support of its submission the learned A.R; for the absessee relied upon the decision of the Hon'ble Supreme Court in the case of CIT VS_ Orissa Corporation (P) Ltd. 159 ITR 78 (SC} 5 On the other hand, the leamed D.R: for Revenue supportcd the orders of the authorities below, We have considered the rival submission: of the parties and have through the ordera of the authorities below. During assessment proceedings the AO noted that the as8e888e has claimed 4 commiswion expenses of {1,03,02,752/ The assessee wa: asked to furnish the details and substantiate the commission payment; In response to the show cause notice the assessee contended that commission has been paid by cheque and TDS has been deducted, the commission expenses are genuine The contention of the assessee was not accepted by the AO holding that some payment of expenses by cheque and deducting TDS will not prove the genuineness of the expenscs The AO issued summons undcr Section 133 to the parties to appear personally and to furnish copy of return, compultation, Copy of bank statement; basis of commission payment and agreement with the assessee. The AQ further concluded that the persons who had attended the proceedings in response to the summong do not know the assessee: The AO concluded that the criteria of commisBion payment are not fulfilled and the as5esbee could not prove the genuineness. The AQ disallowed the commission payment of {93,54,600/ [TA Nc, 444/Nog/20]4 mW/ $ vidhi {inerals & AWloya Put, Lld Thc AQ disallowed the commission observing thal most of the persona to whom commission was paid, has claimed relund of tux in their returns. We have seen lhat thc assessing ollicet issued show cause nolice dated 29.12.2011. The asscssing officer passed thc Essessment order OI] 31.12.2011. The assessment order #a5 passed On very next day, During the first appellate stage the a93689 filed his submissions. In the submissions it was specifically stated that commission agents Iere appointed, The a3Sc8880 also contended that the AO issued show cause notice only On 29.12,2011 about the enquiries conducted by him The asgessee furlher demanded the copy of the inquires conducted end the information gathered by a8ses8ing officer. The submission of the AO Was forwarded to the AO for his remand report: During the remand proceedings the assessee was asked to produce the parties. The axsessee filed its detail reply on 27uh December, 2012 The AO furnished his remand report before RLL 7 CIT(A}; In the remand report the AO, in sum and substance, contended the asscbs8e has not submitted details and exact nature of services fendered by the commission agents, The a85c836e filed its reply in Tesponse to the remand report belore the CIT(A}. The assessee further contended that the AO has not verified the documentary evidences furnished before him. The assessee contended that the commission agents were not the exact agents of distributors; the commission agents found out prospective buyers for the product of the a8sessee. By the activities of the commission agents the turnover ol the a8se8s60 was increased substantially. After considering the contention of the ag8ebse8 and the remand report furnished by the AO the learned CITIA] concluded that the a8seg82e has not been able to prod uce cogent evidences either belore the AQ Or during the appellate proceedings to substantiate the claim of commission, The learned CITIAJ further concluded that no written agreement with the commission agents Or eny correspondence was produced. 7 We have noted that before the AO the asse86ee has filed a detailed submission in response to the show causb notice dated 29.12.2011 ITA Yu. 444/ Narfi 2014 Al $. Vidhi MJinerals & Alloys Pul. Ld 40 to 43 cjf the paper book), The ab5es36C in its submission {pages contended lhat they have receiving the notice in the night and was &sked produce the parties by 304 Deceinbcr; 2011_ The a5a6s8E2 furthcr tO contended that belore the said show causes notice the assessee Was never sked to prove the genuineness or produce the parties; The as3633CC contended that all details of the parties 1o whom commission wag Paid provided. The a88633c€ also asked for cross examination of Tere the parties whose statement was recorded by the AO_ We have noted that the AO has not given any finding on the varivus confirmations filed by the assessce copy ol which is available 0 pages 48 to 79 ol the paper book. The assessce was also placed On record the TDS certificatc: of the commission payment; copy of which is available from pages 88 to 116 of book_ We have further noted that the AO issued show the paper cauge notice dated 29.12.2011 spe king explanation of the asse8820 on 2.2011. The said notice was received by the assessee on 10,00 p.m: Qn:49.12.2011. In our view the AO acted in a hasty manner. The &how cause notice was issued on 29.12.2011_ The assessment order was 30.12.2011. We have seen that the assess86 has filed passed on a response t0 the show cause notice daled 29,12.2011 on 30,12.2011. The AO has not given any finding on the contentions raised in the reply dated 30,12.2011. We have further perused thc net profit ratio [utnished by the assc9sce (page 126 ol the paper book): The asgessee has shown sale of {441,128,278/ The sale of the assessee during the preceding assessment year was 73,15,00,043/- Thus, there was & substantial increase in the sale during the relevent period, The commission payment claim by the assess22 is {1,03,02,752/ The total sale during the year Wa5 {441,128,278/ thus the commission paid by the assessee is only 2.33% of the total sale during the relevant financial year. Considering the facts of the present case when the assesbee has declared net profit of 4 . 189/, which is higher than the subsequent assessment years, the commission paid by the assessee is & reasonable one. Therefore grounds of appeal raised by the assesgee are allowed {TA Mu. 444/M0g/20T+ #/& Vidhi dfiverals & Alloys Fin Lid 8 In the result, the appeal filed by the assessee is &llowed. #PEL Order pronounced in the open court on 234 November, 2017, Sd} - _ (P.K, Bansal) Vice President (Pawan Singh} Judicial Member Nagpur, Dated: 23rd Novernber, 2017 Copy te: 1 The Appellant 2, The Respondent 3, The CITA) -II, Nagpur 4, Tne CIT I, Nagpur 5, The DR, Bench, ITAT; Nagpur Uthayd Ale By Order 1{/ / [orpuczDy` Jess amru rar ITAT; N8heBiiBeacr; Naejzkr #FAFT & R74 1377 T;_ 7 53 Trbunal i@; 'rh n. p