TMI Blog2014 (9) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... y in bringing on record the material at the end of the proceedings which had arisen due to paucity of time during the assessment proceedings - for reason beyond the control of the assessee the evidences could not be filed in the course of the assessment proceedings due to paucity of time granted by the AO specially as the assessee had no interaction with the said parties and was not in a position to control the parties to direct immediate compliance by confirming – Decided against revenue. commission expenses disallowed - Held that:- Sh. Rakesh Talwar was pre-occupied with his medical treatment due to which confirmation reply could not be obtained - Associates support the plea of the assessee accordingly the finding of the CIT(A) is set asdie wherein he has not cared to address the evidences relied upon qua the rendering of services by the party and restore the issue back to the AO to consider the evidence and pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard – Decided in favour of assessee. TDS not deducted on several payments - Whether any expense is claimed under the head freight and cartage to these persons for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eleting the addition of ₹ 11,120,775/- (typographical error, the amount should read ₹ 11,12,775/-) made on account of disallowance of commission expenses ignoring the facts: (a) The assessee company is claiming expenses merely on the basis of amount deleted in bank account but there is nothing on record to prove services rendered expenses are genuine for the business purposes. (b) The assessee company failed to provide the documentary evidences during the assessment proceedings. 2. Whether the Ld. CIT(A) has erred on facts and in law in deleting the addition made u/s 40(a)(ia) amounting to ₹ 50,95,012/- ignoring the facts that assessee company has not deducted TDS on making the payment of freight cartage. 3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 1.1 The assessee is in appeal before the Tribunal on the following grounds: "1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not deleting the disallowance of ₹ 1,04,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed: - Proof of services rendered by the party concerned - Confirmation of the concerned parties - Copies of communication, e-mains, advisory etc. between the assessee and person to whom commission has been paid." 2.3 In response thereto the assessee filed written submissions dated 15.11.20111, the same are extracted in the assessment order and reproduced hereunder for ready-reference: "The assessee has tried to contact them over phone and via e-mail to with reminder sent to RT Associates/Rakesh talwar UAE as also Mr. Zhou of Chunyu Consultants, China but unfortunately there is no response from any of them till date. As regards, Alem Desta Co., Ethipia, there is no e-main contact address, but the owner Mr. Alem Desta was contacted over phone once and requested to provide the required information for the tax purpose. He has neither sent any information nor is responding to out telephone calls." 2.4 Considering the submissions advanced the AO was of the view that the assessee does not having any documentary evidence to prove services rendered by the concerned parties and taking into consideration the fact that no communication is available from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fresh evidences were admitted by the CIT(A) on the following reasoning : "5.3. I have carefully considered the submissions made by the Ld. AR and have gone through the assessment order. I have also considered the remand report submitted by the AO, written submissions of the appellant company, and the rejoinder on the above ground. 5.3.1 As regards to admissions of additional evidences are concerned, I find that assessment order in the present case was passed by the AO on 16.12.2011, and the appellant submitted a letter dated 15.12.2011 with which copies of the relevant agreements towards payment of commission were filed before the OA, which were not considered by the AO while passing the impugned order. Similarly copies of email message from Mr. Zhou of Chunyu Consultants confirming the commission paid to them by the assessee and further confirming that they had seen the mail of the appellant late, could not be filed by the appellant due to genuine reasons explained, and therefore, in the interest of justice, when such evidences prove the genuineness of the transactions, and go to the root of the matter, cannot be ignored just because, for the reasons explained by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the AO confirmation of the swift advice from the ICICI Bank were available for R.T. Associates; whereas for Alem Desta Co. and Zhou Chunyu Consultants they were not readily available because these were relating to old records. However it was argued the bank had separately confirmed the payments made and the confirmations were filed before the AO. It was further submitted that it was specifically brought to the notice of the AO that payment to Rakesh Talwar towards commission for product sourcing from Iran was made through SBI, South Extension Branch, New Delhi as no other bank was willing to transact business with Iran at that point of time due to uncertainty in the geographical location etc. In these circumstances the insistence of the AO to provide copy of PAN Card, I.D. proof, Indian address of these parties and their other business connections in India was assailed as these documents could not be provided as none of the parties resided in India. It was also argued that the AO was informed that the assessee has had no dealings with these parties in any subsequent year. It was also submitted that the AO was also informed that Mr. Talwar was settled in Dubai for over 30 years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is difficult to prevail upon them to provide the required information. It was submitted that the assessee had tried to contact the parties over phone and e-mail and also sent reminder to R.T. Associates and Rakesh Talwar, UAE and also Mr.Zhou of Chunyu Consultant, China but unfortunately there was no response of any of them. As regards Alem Desta Co., Ethiopia it was stated there was no e-mail, contact address but the owner Mr. Alem Desta was contacted over phone and requested to provide information for tax purposes. 3.5 It was reiterated that the commissions were paid in pursuance to services rendered not only for procuring the material but also to send the same to the destination i.e customers of the assessee requiring the making of arrangement for transportation of the same and ensuring the payments from customers and ensuring payments to the assessee. Apart from these bare and simple activities the parties performed various activities outside India as goods were sourced from outside India and sold and delivered outside India which was possible for these parties only as the assessee could not handle these from India and had it attempted to do so itself the sheer cost and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the said fact it was argued has been brought on record by the AO. It was reiterated that it was a legitimate business expenditure of the assessee which has not been doubted and it has resulted in high profit because of the services rendered by these persons which profit the assessee could not have earned without the help of these persons as all the activities performed by them in the absence of the parties abroad could not have been possibly performed by the assessee. It was argued that had the assessee not taken the services of these persons than the assessee would have had to open some office/offices in those countries and employ persons to look after its business affairs who would then seek services from the local persons and as such it was a prudent business decision to pay commission which was a cheaper course of action by way of which the assessee has maximized its profit by exploiting the scarcity of the Ammonium Nitrate at the relevant point of time instead of establishing a business office abroad. Addressing the additional evidences filed it was stated that the AO has not commented negatively thereon which leads to the conclusion that the AO has nothing before it to disr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the assessee did not provide documentary evidence and merely stated that the assessee was unable to contact the said party, the CIT(A) was of the view that in the present day and times where there are so many means of communication available namely e-mail, telephone no etc and confirmations from Alem Desta, Ethiopia and Mr. Zhou Chunyu of China could be filed despite that the assessee has not been able to even contact Sh.Rakesh Talwar was considered to be not credible. In this background the mere fact of payment of commission through banking channels was considered to be not sufficient evidence of rendering the services. Addressing the evidences filed, the CIT(A) noticed that the passports of Mr. Rakesh Talwar, first passport was issued on 21.03.2007 and was valid upto 20.03.2017 and despite that copy of another passport issued on 11.01.2011 was available which was valid upto 10.01.2021. Both the passports showed that the said person was an Indian National and the passports were issued by Consulate General of India, Dubai, UAE. According to the CIT(A), there was a doubt on the identity of Sh. Rakesh Talwar itself. Accordingly rendering of services by M/s. R.T. Associates w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharged by the assessee during the assessment proceedings. As such relying upon the departmental ground it was his submission that the assessee has failed to provide documentary evidence in the course of the assessment proceedings. Accordingly it was his submission that the assessment order be upheld and the impugned order be set aside. 4.2 Ld. AR addressing the departmental grounds submitted that the CIT(A) has arrived at a finding that sufficient opportunity was not given by the AO in the course of the assessment proceedings as such the evidence could be filed at the fag end of the assessment proceedings. It was also his submission that the AO has failed to appreciate the fact that the transaction took place in 2008 and the assessee had neither any prior dealing with these parties and nor subsequent dealing with these parties. It was his submission that there is not even a whisper of suspicion cast by the Revenue on the fact that these were related parties or associated concern or sister concerns etc. It was stated that parties were contacted when due to the prevalence of peculiar shortage occurring due to the restriction imposed by China before the Beijing Olympics for acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents that why it could not be made available during the assessment proceedings does not detract from that fact that nothing adverse to the evidences has been argued as such it was his submission that the departmental appeal deserves to be dismissed. 4.3 Addressing the ground raised by the assessee it was his submission that the assessee has filed petition for admission of additional evidences before the ITAT. Referring to the same it was submitted the petition was filed for admission of additional evidence under Rule 29 of the I.T. Rules on 08.08.2013 and the appeal was adjourned to 14.08.2013 in order to afford department to go through the same. Addressing the said petition which is in continuation of the paper book filed on 01.07.2013 running into 195 pages, it was stated that the additional evidence sought to be admitted are placed in a separate paper book on additional evidence running from 196 to 246 of the paper book. The Ld. AR submitted that page 139 to page 164 of the original paper book contains the written submissions filed dated 12.03.2012., specific attention was invited to page 144 of the same in support of the arguments that the bank confirmations confirming the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) accepted as sufficient evidence for rendering services. The only reason for discarding these relevant and similar evidences in the case of M/s R.T. Associates was that unlike the other two parties herein the assessee could not file a confirmation in response to its e-mails or telephones etc. and the CIT(A) for the said specific reason has rejected the cogent evidence as in insufficient evidence. In these circumstances, it was his submissions that the assessee needs to file additional evidence which has now come in possession of the assessee. The fact that it goes to the root of the matter cannot be disputed. The said evidence it was submitted is the copy of the Death certificate of Mr. Rakesh Talwar which shows his permanent address as A1/302, Diera, Dubai (copy placed on page 196 of the paper book). Addressing page 196A of paper book it was submitted that the said death certificate has been attested by the Embassy of UAE. It was his submission that copies of the old passport and new passport of erstwhile of Rakesh Talwar are placed at page 197-224 which on account of the frequent travel of the said person had to be issued again as per the requirements of the passport of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A and that party. 5. The above Agreement will be in force till 31st March, 2009 and is subject to renewal thereafter with mutual consent. For Chandabh Impex Pvt Ltd. For RT Associates (Anil Khanna) (Rakesh Talwar) Dated :-20th May, 2008." 4.4 Attention was also invited to page 49 which was also available before the CIT(A) and duly confronted to the AO, it was stated is a summary of details of invoices/purchases with gross margin for payment of commission to R.T. Associates wherein invoice reference is given alongwith date and quantity and sales per unit prices, purchase unit price, unit gross margin and total gross margin. Attention was also invited to page 179 of the paper book which shows that the assessee before CIT(A) had made an attempt to search out the mail records of sent and received mails and certain e-mails received from Sh. Rakesh Talwar could be located which were filed alongwith copy of the bank statement of Sh. Rakesh Talwar and passport of Sh. Rakesh Talwar issued from UAE to show that Sh. Rakesh Talwar did not reside in the country, the said is placed at page 179 of the paper book. Addressing page 186 of the paper book, copy of the bank statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of California Center for some rare medical condition available on record at page 242 would show that Associate Professor, Sandeep Kunwar, MD examined him and his Report is on record. As such it was his submission that the suspicion of the department that the travel was vacation/travel is misplaced as the same were frantic efforts made to diagnose the medical condition and ultimately Sh. Rakesh Talwar succumbed to the disease as such it was submitted that the reasons for non-reply of Sh. Rakesh Talwar the only reason which prevailed upon the CIT(A) to discard the cogent evidences which were similar to the other two parties is crucial and goes to the root of the matter and deserves to be admitted. 5. We have heard the rival submissions and perused the material available on record. On a consideration of the same, we are of the view that the additional evidence sought to be admitted by the Ld. AR on behalf of the assessee deserves to be admitted as the reasoning taken by the CIT(A) for not accepting the assessee's claim namely the fact that Sh. Rakesh talwar of R.T. Associates has not responded to the e-mails/telephones of the assessee confirming the rendering of services can be addr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirming. Accordingly we uphold the action of the CIT(A) in accepting the assessee's claim qua the two parties. As such the departmental ground is dismissed. 5.1 Addressing the assessee's ground we have already recorded a finding that the evidences sought to be filed addressing the demise after travel for obtaining medical opinion diagnose the medical condition of Sh. Rakesh Talwar erstwhile resident of Dubai who ultimately passes away on 28.06.2012 in Max Hospital, Saket, New Delhi, within a month of his arrival in India, as such the assessee had adequately led sufficient and cogent evidence to demonstrate that Sh. Rakesh Talwar during the period the assessee was attempting to get a reply to its e-mails / phones etc. Sh. Rakesh Talwar was pre-occupied with his medical treatment due to which confirmation reply could not be obtained. The various pages in the passport referred to by the Sr. DR showed that he traveled to USA, India on specific dates and evidences at pages 225 to 246 which contains copies of medical papers of Sh. Rakesh Talwar from 19.01.2011 in Sharjah, UAE, Dubai, UAE, India, California, USA etc. as such qua M/s R.T. Associates support the plea of the assessee ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 6.2 at pages 17-20 of the impugned order. A perusal of the same shows that attention was invited to the fact that the details of payments of freight and cartage claimed in the P L Account were made to APM Global Logistics Egypt and M/s Al Ansr Co. supported by copies of invoices filed before the AO were relied upon. The inspection charges it was stated were paid to M/s Egyptian Chemical industries and the copies of invoices in support of the said claim available before the AO were relied upon. It was reiterated that TDS was not required to be deducted as the payment towards the said expenses were made to non-resident parties for services rendered outside India which were exempt from tax u/s 9 of the Income Tax Act, 1961 as well as under the relevant DTAA with the respective countries. Regarding freight and cartage on purchases it was submitted that the purchase was generally made on CFR basis which include cost and transportation freight which is paid directly by the supplier except from supplier from Egypt who only supply on FOB basis, requiring the freight to be paid by the buyer. It was submitted that the price which the assessee charges from its customers includes freight ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xported from India, and no freight or inspection charges were paid for any services rendered in India by the above companies to whom appellant company has made the payment. Thus, the only issue to be examined is as to whether any expense is claimed by the appellant under the head freight and cartage to these persons for the services rendered in India or the services were rendered by these companies outside India, on which provisions of section 194C are not applicable. The Appellant company has furnished details of Freight charges paid to M/s. APM Global Logistics Egypt Ltd., and M/s. Al Nasr Co. for Coke Chem. The Inspection charges amounting to ₹ 28,500/- are paid to M/s. Egyptian Chemical Industries. As per Circular No. 786 dated 7.2.2000, no tax was to be deducted where the non-resident agent operates outside the country, and no part of his income arises in India. Further, since the payment is usually remitted directly abroad it cannot be held to have been received by or on behalf of the agent in India. Such payments were therefore, held to be not taxable in India. In the present appeal, appellant company has submitted copies of all the invoices of the freight pai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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