M/S. HARI UDYOG PVT. LTD.,BALASORE vs. JCIT, BALASORE RANGE, BALASORE, BALASORE

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA No.435/CTK/2014 Assessment Year : 2009-2010

Vs. M/s. Hari Udyog Pvt Ltd., JCIT, Balasore Range, At/Po: O.T.Road, Dist: Balasore. Balasore. PAN/GIR No. AABCH 7243 Q (Appellant) .. ( Respondent)

Assessee by : Shri P.K.Mishra, AR Revenue by : Shri B.N. Das, DR

Date of Hearing : 08/06/ 2017 Date of Pronouncement : 12 /06/ 2017

O R D E R Per N.S.Saini, AM This is an appeal filed by the assessee against the order of CIT(A)-1,

Bhubaneswar, dated 5.5.2014, for the assessment year 2009-2010.

requires no separate adjudication by us.

is that the CIT(A) erred in confirming the disallowance made by the

Assessing Officer on commission payment of Rs.8,80,447/-.

2 ITA No. 435/CT K/ 2014 Asse ssment Year : 20 09- 201 0 4. Brief facts of the case are that the assessee derives income from

manufacturing and selling of PVC & HDPE pipes, PVC & JDPE fittings, Tara

Hand Pumps and spare parts, etc. The Assessing Officer observed from the

profit and loss account that the assessee has debited an amount of

Rs.72,24,261/- in the profit and loss account under the head “sales

commission”. The Assessing Officer added Rs.8,80,447/- as bogus

expenses under the head “sales commission” paid to following persons:

Sl.No. Name of the party Sales commission (Rs.)

commission of Rs.6,53,240/- to one Prakash Kumar Mohanty, who

appeared before the Assessing Officer and was examined on oath u/s.131

of the Act. He submitted before the Assessing Officer that he works as a

General Manager in another company and, therefore, the Assessing Officer

was of the view that Shri Mohanty could have not have time to promote the

goods of the assessee company and, hence the Assessing Officer disallowed

the deduction for the same.

Parida, the Assessing Officer observed that a letter was issued by RPAD,

which was returned unserved with the postal remarks “no such address”.

3 ITA No. 435/CT K/ 2014 Asse ssment Year : 20 09- 201 0 The assessee failed to produce Smt. Parida before the Assessing Officer to

prove the identity of the commission agent and genuineness of the

payment. Therefore, the Assessing Officer concluded that payment was

bogus and disallowed the deduction for the same.

Rs.8,500/- to Sumitra Traders and Rs.1,178 to Binakar Supply Agency, the

Assessing Officer observed that detailed particulars were not furnished by

the assessee and, therefore, he held that the genuineness of the

transaction has not been established and disallowed deduction for the

same.

of the assessee company Shri Sangram Kumar Das and Mr Prakash Kumar

Mohanty has stated before the Assessing Officer that the services rendered

by Shri Prakash Kumar Mohanty to whom commission payment was made

comprised of collection of orders of the company, follow up with

Government Departments for releasing payment in favour of the assessee,

existence of an agreement with the company for the aforesaid work, receipt

of commission in terms of the agreement from the company by cheque. It

was further submitted that Shri Prakash Kumar Mohanty was an income

tax assessee having PAN No.AJWPM 3507 F and the receipt of commission

was fully and truly disclosed in his return of income, copy of which was

submitted. It was further submitted that applicable amount of TDS was

deducted from the commission and duly deposited with the I.T.Authorities.

4 ITA No. 435/CT K/ 2014 Asse ssment Year : 20 09- 201 0 Further, regarding commission payment to Smt. Puspalata Parida, the

assessee submitted that she has procured orders and followed up with

various departments for facilitating release of payment. Copy of the

agreement and bills submitted with details of invoices for whom she

procured the orders and also followed up for payments were filed. It was

submitted that Puspalata Parida was an income tax assessee having PAN

No.AYGPP 2914 C and has filed the return of income disclosing receipt of

commission. Copy of agreement and bills with details of invoices for whom

she procured the orders were filed. It was submitted that the applicable

amount of TDS was deducted from the commission and duly deposited with

the I.T.authorities. Hence, it was submitted that the disallowance should

be deleted. Regarding commission payment of Rs.19,548 to Gokul & Co.,

Rs.8,500/- to Sumitra Traders and Rs.1,178/- to Binakar Supply Agency, it

was submitted that payments were small in nature and was not practical to

produce the parties to prove their identity.

observed that in view of detailed discussion by the Assessing Officer, it is

abundantly clear that commission has been paid in the name of Sri Prakash

Kumar Mohanty for no work done and genuineness of the payment has not

been established by the assessee. In the case of Smt. Puspalata Parida,

both existence of commission agent and genuineness of payment has not

been established by the assessee. In the case of commission payment to

Gokul & Co., Sumitra Traders and Binakar Supply Agency, the assessee

failed to provide vital particulars for which no enquiries could be done and

5 ITA No. 435/CT K/ 2014 Asse ssment Year : 20 09- 201 0 hence, existence of commission agents and genuineness of payment has

not been established. Therefore, he confirmed the disallowance of

Rs.8,80,447/-.

before the lower authorities and ld D.R. supported the orders of lower

authorities.

authorities and materials available on record. We find that payment of

commission of Rs.8,80,447/- is not in doubt or debate. Further, the

genuineness of payment is proved from the fact that the assessee has

deducted TDS from the commission payment made to Mr Prakash Kumar

Mohanty and Smt. Puspalata Parida and deposited the same with

Government. The assessee during the course of hearing has also filed

copies of income tax returns of both the persons. The assessee has filed

details such as bills, details of orders procured before the Assessing Officer

and also submitted that they have followed up for payment in favour of the

assessee for the sales made. The Assessing Officer has not brought any

cogent and positive materials on record after verifying the details to show

that same are not genuine without bringing any adverse materials on

record, in our considered view, the Assessing Officer was not justified in

rejecting the details and evidence filed before him in respect of commission

payment. Ld A.R. of the assessee filed before us copy of assessment order

for the assessment year 2011-2012 in the case of the assessee, wherein,

6 ITA No. 435/CT K/ 2014 Asse ssment Year : 20 09- 201 0 assessment has been made u/s.143(3)/147 of the Act dated 30.12.2016

and submitted that commission payment made to very same persons has

been allowed by the Assessing Officer himself. Hence, in our considered

view on the very same set of facts when commission has been accepted by

the revenue in one year and in another year, they cannot turn around and

say that commission payments made to the very same persons are not

genuine and are bogus. Our view finds support from the decision of Hon’ble

Supreme Court in the case of RADHASOAMI SATSANG vs. COMMISSIONER

OF INCOME TAX, 193 ITR 321 (SC), wherein, it has been held that where

a fundamental aspect permeating through the different assessment years

has been found as a fact one way or the other and parties have allowed

that position to be sustained by not challenging the order, it would not be

at all appropriate to allow the position to be changed in a subsequent year.

To the same effect is the decision of Hon’ble Supreme Court in the case of

CIT Vs. Excel Industries Ltd. 358 ITR 295(SC), wherein, it has been held

as under:

“That a consistent view had been taken in favour of the assessee on the questions raised, starting with the assessment year 1992- 93, that the benefits under the advance licences or under the duty entitlement pass book did not represent the real income of the assessee. There was no reason for the court to take a different view unless there were very convincing reasons, which there were not.

Supreme Court and keeping in view the fact that no change in facts has

been brought on record by the revenue during the year under appeal, we

7 ITA No. 435/CT K/ 2014 Asse ssment Year : 20 09- 201 0 set aside the orders of lower authorities and direct the Assessing Officer to

allow commission payment to Shri Prakash Kumar Mohanty and Smt.

Puspalata Parida. However, in respect of commission payment to Gokul &

Co., Sumitra Traders and Binakar Supply Agency, we find that the assessee

has failed to provide vital particulars regarding commission payment and

hence, we confirm the addition to that extent. Hence, this ground of appeal

is partly allowed.

the CIT(A) erred in confirming the disallowance of Rs,1,34,276/- under the

head “sales promotion expenses”.

assessee has claimed deduction of Rs.1,34,276/- under the head “sales

promotion expenses” which comprised of providing hotel facilities and

refreshment, etc to CIPET Inspectors and, therefore, held that same cannot

be treated as business expenditure as CIPET was a Central Government

Institution. The assessee submitted that it was incurred in the normal

course of business to the extend of courtesy and due to business exigency.

The Assessing Officer did not accept the explanation of the assessee and

disallowed the same.

before the lower authorities. Ld D.R. supported the orders of lower

authorities.

8 ITA No. 435/CT K/ 2014 Asse ssment Year : 20 09- 201 0 17. After considering the rival submissions and perusing the materials on

record, we find that the assessee has claimed expenses of Rs.1,34,276/-

as sales promotion expenses. The said expenditure was incurred on

refreshment provided to CIPET Inspectors. The Assessing Officer

disallowed the deduction on the ground that it was not business

expenditure and was spent for providing hospitality to Government

servant. The claim of the assessee is that the expenditure has been

incurred for normal course of business and is business necessity and hence,

the deduction should be allowed for the same. In the above facts and

circumstances of the case, we are of the considered view that the amount

has been incurred for carrying out the business activities of the assessee

and for the business purposes and, therefore, the same is allowable as

deduction u/s.37(1) of the Act. Further, we find that it is not the case of

the Revenue that the expenditure incurred by the assessee is not genuine

or is excessive. Hence, we set aside the order of the CIT(A) on this issue

and delete the disallowance of Rs.1,34,276/- and allow the ground of

appeal of the assessee.

under:

“That the ld Forum below should have allowed the credit of total “amount of TDS claimed by the assessee and should not have disallowed TDS to the tune of Rs.31,679/- ignoring the fact of production of TDS certificate.” 19. We find that the assessee had raised this ground as Ground No.6 of

the appeal before the CIT(A) filed in Form No.35 of appeal memo and the

9 ITA No. 435/CT K/ 2014 Asse ssment Year : 20 09- 201 0 CIT (A) has not adjudicated the same. Hence, we set aside this issue to

the file of the CIT(A) to adjudicate the issue as per law.

SR.PRIVATE SECRETARY ITAT, Cuttack