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Income Tax Appellate Tribunal, ‘B’ (SMC
Before: SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
In this appeal filed by the assessee, which is directed against an order dated 16.01.2017 of the ld. Commissioner of Income Tax (Appeals)-15, Chennai, it is aggrieved on a disallowance of �30,94,797/- claimed as commission, which disallowance was confirmed by the ld. Commissioner of Income Tax (Appeals).
ITA No. 659/Mds/2017. :- 2 -:
Shri. Anandd Babunath, the authorized representative of the 2. assessee has filed an adjournment petition. However, the reasons shown for seeking the adjournment is not satisfactory and therefore the adjournment petition is dismissed.
Facts of the case are that assessee a trader of DEPB license had filed its return of income for the impugned assessment year disclosing income of �13,64,860/-. During the course of assessment proceedings, it was noted by the ld. Assessing Officer that against turnover of �157.05 crores assessee has booked purchase of DEPB licenses worth �155.76 crores. As per ld. Assessing Officer one of the major expenditure debited in the profit and loss account was commission of �86,64,102/-. Ld. Assessing Officer enquired with the parties to whom assessee had claimed payment of commission. As per ld. Assessing Officer, replies were received from all the parties but the details furnished by them indicated that few of them had not rendered any services for receiving commission from the assessee. The list of those persons as tabulated by the ld. Assessing Officer is given hereunder:-
ITA No. 659/Mds/2017. :- 3 -:
Sl.No Name of the party Bill date Amount of commission � 1 Vivek Gupta HUF 23.03.2012 6,70,402 2 Deepika Gupta 23.03.2012 5,91,688 3 Priya Kothari 31.03.2012 2,23,869 4 Pinky Devi 29.03.2012 6,15,417 5 Pooja Modi 29.03.2012 4,06,646 6 Prakash Kothari 31.03.2012 2,50,297 7 Kausalya 31.03.2012 3,36,478
Total 30,94,797 As per ld. Assessing Officer bills were raised by the persons and payments effected by the assessee during the last week of the relevant previous year. Further, as per the ld. Assessing Officer in these cases, the license identification numbers were not given. As against this, as per ld. Assessing Officer in the other case of commission payments, the license number on which such commission was paid were clearly indicated. When this was put to the notice of the assessee, it furnished a calculation sheet and also submitted the debit notes issued by the above parties. However, as per the Assessing Officer the license numbers referred in the debit notes were in an ascending order and indicated that the above parties were rendering services to the assessee in a sequential manner which was not possible in normal circumstances. That apart, as per ld. Assessing
ITA No. 659/Mds/2017. :- 4 -:
Officer one of the recipient namely Ms. Pinky Devi had not filed her return of income at all. He thus, refused to believe the version of the assessee in so far as �30,94,797/- claimed as commission. Out of the total commission of �86,64,102/-, a disallowance of �30,94,797/- was made.
Aggrieved, the assessee moved in appeal before the ld. Commissioner of Income Tax (Appeals). As per assessee all details of the commission and the calculation sheet were filed before the ld. Assessing Officer. Contention of the assessee was that the payments were made through banks and taxes all deducted at source. Assessee pointed out that the commission expenditure was claimed at �86.64 lakhs against a total turnover of �157.05 crores. According to the assessee, just because value of the license mentioned in the debit note and the value of the license as per ledger of the buyer differed , the claim of commission ought have been disbelieved. Ld. Commissioner of Income Tax (Appeals) sought a remand report from the ld. Assessing Officer. The ld. Assessing Officer in his remand report dated 20.12.2016 stated as under:-
"i. Based on the submissions of the assessee before the learned CIT(A)- 15, opportunity was given to the assessee to file details in support of the claim made thereto. The assessee was asked to clarify the reason for difference in the value of the license and the purchase value of the license. In response, the assessee has filed reply dated 19/10/2016. On verification
ITA No. 659/Mds/2017. :- 5 -: of Invoices for OEPB licenses it is noticed that, for illustration purposes, in the case of Petro Plast Industries Ltd. Invoice No.280/2011-12, the amount appearing in their books of account is Rs.29,35,951/- which is reflected in the invoice under the break-up Rs.28, 78,383/- plus CST @ 2.00% of Rs. 57, 568/-. This is the value for which the license is traded. The license value appearing in the Invoice is Rs. 30,73,592/-. The assessee in his explanation states that " the value of license is the value for which the government issue the license and the importer can use the same value for the imports of goods. On cross verification of the ledger of the party viz. M/s. Petro Plast Industries Ltd already filed in this office, the value of licence traded for Rs. 29,35,951/- has been booked in the books of account. This represents the actual transaction value. Similar verification was made in case of Invoice No. 301/2011- 12. ii.The assessee contends that these are open-ended licenses and sold according to market demand and hence the sequence of numbering varies vis-a-vis the dates. To verity this claim, the assessee was asked to produce samples of licenses handled by them. In response, the assessee has produced various categories of licences nomenclatured viz. Merchandise Exports from India Scheme (MEIS); Focus Product Scheme; Vishesh Krishi & Gram Udyog Yojana; Incremental Export Incentivisation Scheme; Status holder Incentive Scrip;DEPB-Post export. It is apparent that the schemes under which licenses are dealt are manifold. ' iii.The next issue is whether the commission paid was genuine or not. To verify this during the course of assessment proceedings, the case of Ms. Pinky Devi was taken and disallowed. Now, during the course of remand proceedings, the assessee was asked to produce proof that the commission paid to the seven parties were genuine or not. The same were verified by asking the assessee to file their returns of income with necessary schedules to reflect the receipt of such commission payments. Assessee has filed Return of Income of (a) Ms. Pooja Modi for AY 2012-13 filed on 13/09/2012 & commission receipts are reflected in the R/II; (b) Ms. Priya Kothari for AY 2012-13 filed on 02/03/2013 & commission receipts are reflected in the R/I; (c) Ms. Deepika Gupta for AY 2012-13 filed on 03/10/2012 & commission receipts are reflected in the R/I; (d) M/s. Vivek Gupta & Sons HUF for AY 2012-13 filed on 03/10/2012 & commission
ITA No. 659/Mds/2017. :- 6 -: receipts are reflected in the R/I; (e) Mr. Prakash Kothari for AY 2012-13 filed on 02/03/2013 & commission receipts are reflected in the R/I (f) Ms. Kausa/ya for AY 2012-13 filed on 13/0912012 & commission receipts are reflected in the R/I
However, in the case of Ms. Pinky Devi, the assessee has not produced the copy of return of income for the AY 2012-13 in support of his claim. Hence, the same is unsubstantiated. "
Ld. Commissioner of Income Tax (Appeals) based on the above remand report noted that ld. Assessing Officer had accepted the contention of the assessee except in the case of Ms. Pinky Devi.
Despite this, the ld. Commissioner of Income Tax (Appeals) sustained the whole of the disallowance, citing a reason that concerned parties who were all related to the directors of the assessee company and had rendered similar services to only one other person other than the assessee and hence the claim could not be believed.
Now before me, ld. Authorised Representative strongly assailing the orders of the lower authorities submitted that the ld. Assessing Officer having accepted the claim of the assessee as genuine in his remand report, the ld. Commissioner of Income Tax (Appeals) ought have deleted the disallowance. Further, according to him, except Shri. Priya Kothari and Shri. Prakash Kothari among the nine commission agents all others had rendered commission services to other parties also.
ITA No. 659/Mds/2017. :- 7 -:
Per contra, ld. Departmental Representative strongly supported the orders of the authorities below.
I have considered the rival contentions and perused the orders of the authorities below. The remand report of the ld. Assessing Officer given during the course of the proceedings before the ld. Commissioner of Income Tax (Appeals) has been reproduced by us at para 4 above. The ld. Assessing Officer had required the assessee to prove that parties were genuine. Assessee had filed copies of the tax returns and these were verified by ld. Assessing Officer during the remand proceedings. He also found that commission received were reflected in such return except for Smt. Pinky Devi who had not filed a return. Ld. Commissioner of Income Tax (Appeals) has noted this fact at para 18 of his order. The only reason why the ld.CIT(A) confirmed the disallowance was that the parties had rendered services to only one other person apart from the assessee. In my opinion, when the payments where effected by cheques and the concerned parties had reflected the receipts as commission in their respective returns, a disallowance ought not have been made, merely on suspicion and surmises. Except for Priya Kothari and Prakash Kothari, the other commission agents had admittedly rendered services atleast to one other party. This is clear from the tabulation given by the ld.
ITA No. 659/Mds/2017. :- 8 -:
Commissioner of Income Tax (Appeals) at para 25 which is reproduced hereunder:-
Sr. Name of Name of Amount Nature of Education Work No commission creditor as credited payment al experience agent per 26AS in 26AS as per Qualificati 26AS on Nil 1 Vivek Gupta Bindal Nitin 2,00,000 u/s. 194H Nil & Sibs (HUF) Nil 2 --do-- Saraf 6,70,402 u/s. 194H Nil Merchandise India Pvt. Ltd, the appellant Nil 3 Pooja Modi --do-- 4,04,646 u/s. 194H Graduate Nil --do-- 4 Suman Modi 1,87,790 u/s. 192 -- (Salary) Nil 5 Koushalya Anil Modi 96,000 u/s. 194A M.Com Modi (interest) Nil 6 Dipikka Bindal Nitin 2,00,000 u/s. 194H Graduate Gupta Nil 7 --do-- Saraf 5,91,698 u/s. 194H -- Merchandise India Pvt. Ltd, the appellant Nil 8 Priya Kothari --do-- 2,48,743 u/s. 194H --do-- Nil 9 Prakash --do-- 2,50,297 u/s. 194H --do-- Kothari As for the alleged commission paid to Ms. Pinky Devi, I find that return was filed by her only after institution of the appeal by the assessee before the ld.CIT(A). The assessee also admitted before the ld. Commissioner of Income Tax (Appeals) that Ms. Pinky Devi had no experience in commission agency. Considering all these facts and circumstances of the case, I am of the opinion that disallowance of commission should have been limited to the payment claimed to have effected to Ms. Pinky Devi which comes to �6,15,417/-. I therefore
ITA No. 659/Mds/2017. :- 9 -: have no hesitation in deleting the disallowance of � 24,79,380/- out of the total disallowance of �30,94,797/-. The disallowance is limited to �6,15,417/- claimed to have been paid to Ms. Pinky Devi. Ordered accordingly.
In the result, the appeal of the assessee is partly allowed. 8.
Order pronounced on Thursday, the 10th day of August, 2017, at Chennai.