DCIT, CHENNAI vs. GIMPEX LIMITED, CHENNAI

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

The United Nations nominated a committee called “Volker Committee” to enquire into the irregularities in “Food for Oil Programme”. The assessee is also found to be one of the companies paid kickbacks to Iraqi Government and its agents. The Assessing Officer disallowed the claim of the assessee on the basis of the Volker Committee’s report, under Section 37 of the Income- tax Act, 1961 (in short 'the Act'). On a query from the Bench whether the Assessing Officer made any independent enquiry apart from Volker Committee report, the Ld. D.R. very fairly submitted that the Assessing Officer has not made any independent enquiry other than placing reliance on the report of the Volker Committee.

Rajarani Exports (P.) Ltd. (2014) 361 ITR 152. The CIT(Appeals), after placing reliance on the Calcutta High Court’s decision and Kolkatta Bench’s decision in TIL Ltd. v. ACIT (16 SOT 33) and the decision of Mumbai Bench of this Tribunal in NSIL Exports Ltd. v.

DCIT (2014) 63 SOT 43, found that no illegality can be attributed to the assessee’s payment of commission outside India. Accordingly, the CIT(Appeals) deleted the addition.

However, the Revenue claims the same as kickbacks to the authorities of Iraqi Government and its agents. The Assessing Officer has not made any individual enquiry with regard to the nature of payment made by the assessee. The Assessing Officer simply placed reliance on the report of Volker Committee. In fact, the Volker Committee was nominated by United Nations for making enquiry with regard to alleged irregularities. The assessee, being businessman, was necessarily required to pay certain commission for availing the service outside the country. Whether it is kickback or not has to be independently enquired by the Assessing Officer.

Of course, report of the Volker Committee may be one of the relevant factors for placing reliance by the Assessing Officer.

However, the Assessing Officer cannot place reliance exclusively on the report of the Volker Committee for arriving at the conclusion that the assessee has made payment towards kickbacks. Income-tax Act, being a special enactment and the Assessing Officer was entrusted with the power to make enquiry with regard to the nature of business and the expenditure said to be incurred by the assessee, in addition to the report of Volker Committee, the Assessing Officer has to necessarily examine the material available on record apart from enquiries and should come to an independent conclusion. This Tribunal is of the considered opinion that the Assessing Officer, being a quasi-judicial authority under the provisions of Income-tax Act, has to come to an independent conclusion without being influenced by the conclusion reached by any of the authority either in our country or outside the country. The primary function of the judicial authority in India is to adjudicate the matter independently without being influenced by any of the external factors. In this case, the Assessing Officer has not made any enquiry at all other than simply placing reliance on the report of the Volker Committee.

Therefore, there was a commercial expediency in making the payment. Accordingly, the Kolkatta Bench of this Tribunal found that the disallowance under Section 37 of the Act, on the basis of the Volker Committee’s report, is not sustainable. The Calcutta High Court found that the findings of the CIT(Appeals) and the Tribunal are correct and accordingly, confirmed the order of the Kolkatta Bench. In this case also, an identical situation exists and the assessee has paid commission for availing service outside India. In the absence of independent enquiry conducted by the Assessing Officer, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly deleted the addition. Accordingly, the same is confirmed.

Order pronounced on 11th September, 2015 at Chennai.