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Income Tax Appellate Tribunal, “B” BENCH : KOLKATA
Before: Hon’ble Shri S.S. Godara, JM & Shri M.Balaganesh, AM ]
ORDER Per M.Balaganesh, AM
This appeal by the Revenue arises out of the order of the Learned Commissioner of Income Tax(Appeals)-1, Kolkata [in short the ld CIT(A)] in Appeal No. 03/CIT(A)- 1/Circle-3(1)/2015-16 dated 14.07.2016 against the order passed by the DCIT, Circle- 3(1), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 16.03.2015 for the Assessment Year 2010-11.
The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in deleting the disallowance made in the sum of Rs. 1,21,52,000/- towards commission expenditure, in the facts and circumstances of the case.
M/s Calcutta Mining Sealants Pvt. Ltd. A.Yr. 2010-11 3. The brief facts of the issue are that the assessee is a private limited company engaged in the business of manufacturing of mining equipment/chemicals and had filed its return of income for assessment year 2012-13 on 29.09.2012 declaring total income o Rs. 1,29,17,339/-. In the course of the assessment proceedings, the assessee filed the details of commission expenditure together with the supporting documents among other details. The ld. AO from the documents submitted by the assessee company observed that the assessee had paid commission to the following parties: Name and Address of the Nature of Amount of the TDS made Party Expenses Expenses Sugam Vinimay Pvt. Ltd., Commissions 1,02,30,000/- Nil Ananta Bhavan, 94, Vivekanand Nagar, P.O.- Podrah, Howrah-711109. Snehsil Marketing Pvt. Commissions 15,50,000/- Nil Ltd., Ananta Bhavan, 94, Vivekanand Nagar, P.O.- Podrah, Howrah-711109. Silverpoint Infratech Pvt. Commissions 3,72,000/- Nil Ltd., Ananta Bhavan, 94, Vivekanand Nagar, P.O.- Podrah, Howrah-711109. Total 1,21,52,000/- The ld. AO in order to verify the said expenditure issued summons to those commission agents. These summons were duly served on those commission agents but none appeared before the ld. AO in response to the summons. Later the ld. AO issued show cause notice to the assessee company on 09.02.2015. The ld. AO observed that in response to the said show cause notice no explanation was furnished by the assessee 2
M/s Calcutta Mining Sealants Pvt. Ltd. A.Yr. 2010-11 company. Accordingly he proceeded to disallow the commission expenditure of Rs. 1,21,52,000/- treating the same as bogus expenditure and completed the assessment.
Before the ld. CIT(A), the assessee stated that it had paid commission to the following parties: Name Amount Sugam Vinimay Pvt. Ltd 1,02,30,000/- Snehsil Marketing Pvt. Ltd. 15,50,000/- Silverpoint Infratech Pvt. Ltd. 3,72,0000/- Kalol Kumar Mukherjee 31,58,121/- Total 1,53,10,121/- Out of the above, the commission paid to Mr. Kalol Kumar Mukherjee in the sum of Rs. 31,58,121/-was allowed by the ld. AO in the assessment. The assessee pleaded that the summons issued by the ld. AO u/s 131 of the Act to the remaining three parties were duly served on them. This clearly proves that the existence of those parties are proved beyond doubt. The payments of commission were made by the assessee to those parties for procurement of orders from different locations of the Eastern Coal Fields Ltd and for collecting the payments from such locations. It was submitted that each of the above parties have raised their periodical bills for services rendered and their entitlement of commission, based on supplies made to Eastern Coal Fields Ltd. each month. All the aforesaid parties have duly collected service tax on their monthly/periodical commission entitlements as per their invoices raised. The payments of commission was also made on a monthly basis as per the clearing of the bills raised by the assessee. No tax was deducted at source on commission payments made to those parties in view of the zero percentage tax deduction certificate obtained by those agents from DCIT(TDS) u/s 197(1) of the act. The assessee also placed evidence on record to prove that all the aforesaid companies were shown as active companies in the master date of website of 3
M/s Calcutta Mining Sealants Pvt. Ltd. A.Yr. 2010-11 Registrar of Companies (ROC) and had duly filed their annual returns for the year ended 31.03.2012 duly showing huge commission income which includes commission received from the assessee also. The assessee placed reliance on various High Court decisions and Hon’ble Supreme Court decisions including the Co-ordinate Bench decision of this Tribunal in the case of Ashok Kumar Agarwal vs. ACIT in dated 09.10.2015. Apart from that, the assessee has forcibly submitted before the ld. CIT(A) that the ld. AO grossly erred in stating that no details were filed by the assessee in response to show cause notice issued on 09.02.2015 proposing to disallow the commission expenditure. In this regard, he stated that a detailed reply dated 11.02.2015 was filed before the ld. AO in Tapal in support of which acknowledgement given by the ASK Information Centre of the Income-tax Department was placed on record. It was also pleaded that all these parties are regular parties of the assessee and the assessee has been paying the commission in the earlier years which were allowed as deduction by the ld. AO. All these commission payments were made in the regular trade and normal course of business and warranted by commercial expediency.
The ld. CIT(A) appreciated the aforesaid facts and contentions of the assessee and deleted the disallowance of Rs. 1,21,52,000/- towards commission. Aggrieved the revenue is in appeal before us.
We have heard the rival submissions. At the outset, we find that the ld. AO had erred in stating that the assessee had not filed any reply in response to show cause notice dated 09.02.2015 wherein he proposed to disallow the commission expenditure treating the same as bogus. In this regard, we find that the ld. AR had filed a copy of letter dated 11.02.2015 filed before the ld. AO in Tapal. The said letter clearly reflects the acknowledgement given by the ASK Information Centre of the Income-tax Department as having been filed on 11.02.2015 in connection with the assessment proceedings for 4
M/s Calcutta Mining Sealants Pvt. Ltd. A.Yr. 2010-11 assessment year 2012-13 of the assessee. In the said letter, the assessee had given complete details of the subject mentioned commission payment together with legal submissions. We find that the ld. CIT(A) had placed reliance on the decision of Co- ordinate Bench of this Tribunal in the case of Ashok Kumar Agarwal vs. ACIT in dated 09.10.2015. The ld. DR stated that the facts before the Tribunal in that case were totally different from the facts of the instant case, inasmuch as in that case, the books of accounts were produced by the assessee and complete details of commission were filed by the assessee, whereas, in the instant case, no details were filed by the assessee company according to assessment order. Accordingly, he argued that the reliance placed on the decision of the Tribunal is misplaced on facts. We find that this argument of the ld. DR has already been addressed hereinabove inasmuch as the assessee had duly filed the complete reply vide his letter dated 11.02.2015 before the ld. AO. We also find that the ld. AO indirectly acknowledges furnishing of these details in his assessment order in page 2 by mentioning that ‘from the documents submitted by the assessee’. This itself goes to prove that the assessee had indeed filed relevant documents before the ld. AO. There is no dispute about rendering of services by the concerned commission agents to the assessee by way of procuring orders from the customers and securing the payments from them. There is no dispute that the commission bills are raised by these agents periodically and that the payments are made to them together with service tax portion thereon by account payee cheques. It is not in dispute that all the three commission agents had duly furnished a certificate issued by DCIT(TDS) u/s 197(1) of the Act as under: Sugam Vinimay Pvt. Ltd. certificate dated 17.08.2011 Snehsil Marketing Pvt. Ltd. certificate dated 16.08.2011 Silverpoint Infratech Pvt. Ltd. certificate dated 16.08.2011 The very fact that the DCIT(TDS) has issued Nil deduction certificate u/s 197(1) of the Act obligates the assessee to make the payment without deduction of tax at source. We hold that the identity of the commission agents are proved beyond doubt inasmuch as 5
M/s Calcutta Mining Sealants Pvt. Ltd. A.Yr. 2010-11 the summons issued by the ld. AO on them were duly served on them; they are income tax assessees; certificate issued u/s 197(1) of the Act for each of the commission agents by the Income-tax Department; all the commission agents have filed their income-tax returns showing the commission received as income in their respective returns and master data of Registrar of Companies website showing these companies in ‘active’ category. We hold that the payments in commission are made on a monthly/periodical basis based on the clearing of the bills of the assessee pursuant to periodical invoices raised by those commission agents clearly defining the services rendered by them and linking the sales made through them for and on behalf of the assessee. All these payments are made by a/c payee cheques. There is absolutely no iota of evidence to suspect the genuineness of these transactions and there is no case made out by the revenue before us to sustain the order of the ld. AO. We also find that the ld. CIT(A) had rightly placed reliance on the Co-ordinate Bench decision rendered to supra among other decisions.
In view of the aforesaid observations, in the facts and circumstances of the case, we hold that the ld. CIT(A) had rightly deleted the disallowance in the sum of Rs. 1,21,52,000/- and we find no infirmity in his order. Accordingly, grounds raised by the revenue are dismissed.
In the result, the appeal of the revenue is dismissed. Order pronounced in the Court on 24.08.2018