PRAVIN KUMAR HETAMSARIA vs. ACIT, CIR-3, ASANSOL, ASANSOL

A.Y. 2010-11 Pravin Kr. Hetasmsaria Vs. ACIT, Cir-3 Asl. Page 2 2. We straightway come to the relevant facts regarding the above sole issue of commission expenditure disallowance. There is no dispute that the assessee had claimed to have incurred the impugned expenditure in respect of his automobile agency under the name and style of M/s Pratik Automobiles. The Assessing Officer issued u/s 133(6) notices to eleven parties on test check basis. This enquiry in furtherance thereof revealed that the corresponding customers denied to have engaged any commission services of the relevant pages the Assessing Officer therefore treated the impugned expenditure as non genuine to disallow the same in his assessment order.

CIT(A) upholds assessment findings as under:- “12. Ground 3 is against disallowance of commission. The assessee has debited commission payment to Mrs. Itu Chakraborty of Rs.8,96,004/-, Shri Rajiv Chakraabaorty of Rs.8,95,072/- and Shri Shyam Sunder Hetamsaria Rs.8,94,971/-. The last is father of appellant, the second person is an active employee of assessee and first one wife of Shri Rajiv Chakraborty. 13. As part of enquiry in respect of Shri Shyam Sunder Hetmsaria, on basis of information furnished before Assessing Officer, notices were issued to some purchasers, the extract of same from as order is as under:- ‘To verify the veracity of the claim of the assessee, notice under section 133(6) of the income Tax Act, 1961 was issued to some of the parties on test check basis who have been claimed to have been introduced by the assessee with M/s Pratik Automobiles for the purchase of vehicles. Replies received from maximum parties. But two of them returned unserved. The details of the reply are reproduced here under:- Sl. No Name Remarks 1 Vishal Singh Lt. Col No commission agent involved vehicle purchased through Canteen Store Department, Ministry of Defence, purchase order issued by CSD Depot. 2 Ramesh Kumar Mohta I have not engaged any commission agent for the said transaction 3 Indrajeet Singh Direct purchased. (there was no any agent etc.) 4 Sri Abhay Kumar Singh No broker/agent, no commission has been paid 5 Md. Samim There is not any commission agent involved in the transaction. There was nothing any by me to any broker/agent/intermediary or any other person 6 Shyam Prasad Gupta No commission agent or broker 7 Pawan Kumar Singh No broker/agent, no commission has been paid 8 Sri Hussain Khan Leter return undelivered 9 Sri Chandra Bhusan Letter returned undelivered 10 Shri Sameer Kr Mondal No commission agent involved 11 Monica Minz No commission agene involved The matter was put to assessee by assessment order and explanation offered before the Assessing Officer was taken in record. The Assessing Officer made detailed analysis in assessment order and disallowed the sum.

Statement was recorded from Shri Rajiv Chakrabotry and Smt. Itu Chakraborty as part of enquiry into genuineness of payment made to them. They deposited that they did arrange for transaction and for service rendered, the commission was received by them. To a question on TDS Smt. Itu Chakraborty stated that commission is paid to sub-agents at about Rs.500/- and if true then she has arranged sale of nearly 1972 vehicles, which lacks belief. Further she does not have any details on who the commission agents were. Shri Rajiv Chakraborty deposed that he has no evidence on his business activity mainly proof of his business expense. It is noted that individually both Shri Rajiv Chakraborty and Smt. Itu Chakraborty has disclosed only a small part of claimed receipts from the appellant and does claim business expenses, unproven.

The factual and circumstantial aspects of commission payment is available in assessment order and hence not repeated in toto. For an expense to be allowed as a genuine business expenditure, it has to be established to be wholly and exclusively for business. Here the fact that sum was debited and paid is recordically correct as far as appellant is concerned. Mere payment does not make the same an expenditure that can be allowed it has to be established to be expenditure incurred wholly and exclusively for business. When the payee is not able to establish that service was rendered or when an explanation is offered, which lacks credence, the natural inference is that the same is not incurred were for business. Establishing genuineness with reasonable precision that payment was made for service rendered is since qua non for allowing the claim. Such expenditure debited, not having substance or credence has to be disallowed by Assessing Officer and I hold that the act of Assessing Officer is in order.

The appellant also informed that in case of Shri SS Hetamsaria, the claim of commission receipt was accepted by Assessing Officer. The mater being handled in this appeal is genuineness is in hands of appellant. In IT proceedings, the principle of res judicate does not apply. Further the following case decision when considered demonstrates that on ground that assessment made in hands of Shri Shyam Sundar Hetamsaria does not make me alter the view. ‘ If the previous decision is plainly erroneous, there is a duty of the Court to review it and not perpetuate the mistake i.e. a vital point was not considered or when an earlier relevant statutory provision had not been brought to the notice of Court [Union of India & Anr. Vs. Raghubir Singh (SC) 178 ITR 548, Sri Agasthyar Trust vs. CIT 236 ITR 23] To perpetuate an error is no heroism [Distributors (Boaroda) P Ltd. Vs Union of India & ors. (SC) 155 ITR 120] A.Y. 2010-11 Pravin Kr. Hetasmsaria Vs. ACIT, Cir-3 Asl. Page 4 Tribunal need not blindly follow earlier decision of it if it did not reflect the correct position of law [CIT vs. Hi-Tech Arai Ltd. (Mad) 321 ITR 477]’ Thus filing of an incorrect return by Shri Shyam Sunder Hetamsaria in no way justifies allowing of a deduction claimed not established to be genuine or incorrect wholly and exclusively for business.

The appellant also has given a long list of case laws. None of them address issues raised in preceding paragraph notably not established to be one of payment of commission for actual rendering of service so that condition in section 37(1) is met.

In view of discussion in paragraph 14,5, 16 and 17 of this order ground 3 stands dismissed.”

We have given our thoughtful consideration to rival contentions. The sole question arise for our apt adjudication of genuineness of assessee’s commission expenditure claimed as paid to the above three parties. Learned Departmental Representative places strong reliance upon the CIT(A)’s above extracted findings.

It emerges first of all that the assessee’s sale in the impugned assessment year read figures of ₹31,42,93,631/- as against the corresponding amounts of ₹114,57,07,778/- and ₹106,447,47,845/- in the two succeeding assessment years. He has booked corresponding commission expenditure of ₹26,86,047/- (in dispute), 41,00,079/- and ₹20,95,883/-; respectively. The Revenue fails to dispute that the above latter two commission amounts stand accepted in case of first payee to be genuine and correct. It strongly argues that every assessment year is difference since res judicate principles does not apply in case of income tax proceedings. There can hardly be any dispute about this settled legal position. The fact also remains that revenue authorities themselves have accepted similar claim; almost proportionate in two consecutive latter assessment years. We therefore conclude that the impugned expenditure which has been claimed as in view of all the documentary evidence cannot be disregarded just because some of the customers have deposed against the assessee as such commission exercises A.Y. 2010-11 Pravin Kr. Hetasmsaria Vs. ACIT, Cir-3 Asl. Page 5 may or may not be in their knowledge. We accordingly direct the Assessing Officer to delete the impugned addition. It is made clear that our instant findings in the impugned assessment year shall not be treated as precedent.