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2016 (3) TMI 41 - ITAT MUMBAI

2016 (3) TMI 41 - ITAT MUMBAI - TMI - Reopening of assessment - additions solely on the basis of such retracted statements - disallowance of sub-commission paid to M/s. Airwings Travel and Cargo Pvt. Ltd. and Airtrac Agents (India) Pvt. Ltd - Held that:- Even the AO was of the view that there was no direct incriminating evidence found against the assessee during the search action. We further find that even the Ld. CIT (A) in the impugned order has discussed that Airtrac had derived commission an .....

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e been regularly filing their returns of income with Income Tax Department. The income returned was duly accepted in various assessment proceedings for different years as detailed in the chart. Under such circumstances, adding the same income at the hands of assessee would amount to double taxation on the same income. Considering the above submissions and evidences on file and in the absence of any incriminating evidence against the assessee, the additions solely on the basis of retracted statem .....

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ering business to the assessee for which the assessee was paying the commission to them including the concerns about which the AO has doubted the transactions.

The another interesting fact is that assessment of the assessee for the assessment year 1996-97 which was originally completed were reopened under Section 148 on the basis of the information gathered during the search and seizure proceedings and the statements recorded as explained above under Section 132(4). During the reopene .....

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discussion made above, we do not find any justification on the part of lower authorities in making the impugned additions and the same are accordingly set aside. - Decided in favour of assessee - ITA(SS) No.106/M/2006, ITA(SS) No.110/M/2006 - Dated:- 22-1-2016 - SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER For The Assessee : Shri Sanjiv M. Shah, A.R. For The Revenue : Shri Rajesh R. Prasad, D.R. ORDER Per Sanjay Garg, Judicial Member: The above titled cross appea .....

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are taken together for disposal by this common order. 2. The assessee in his appeal has taken the following grounds of appeal: 1. On the facts and in the circumstances of the case, Learned CIT(A) erred in confirming that the provisions of Chapter XIV-B are applicable to the facts of the case and accordingly the assessment made under Section 158BC read with Section 143(3) of the Income Tax Act is valid. 2. On the facts and in the circumstances of the case, Learned CIT(A) erred in confirming that .....

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ission paid to Airwings Travel and Cargo Pvt. Ltd. and Airtrac Agents (India) Pvt. Ltd. have been offered for taxation in the earlier years by the respective recipients and their status was accepted as such in the past and therefore the amounts cannot be brought to tax in the block period of the appellant. 5. Without prejudice to the foregoing, appellant pleads that on the facts and in the circumstances of the case, Learned CIT(A) erred in not appreciating the fact that the recipients of the sub .....

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rred in not appreciating the fact that if the practice followed in the past in the assessment have to be deviated from reasons for the deviation are required to be brought on record. Appellant craves leave to add further grounds or amend or alter the existing grounds at the time of hearing. 3. The Revenue on the other hand in its appeal has taken the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erre .....

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mises which had no separate infrastructure. 2. The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the Assessing officer be restored. 4. The brief facts of the case are that the assessee is a company engaged in the business of freight and forwarding. A Search and seizure action under Section 132(1) of the Income Tax Act, 1961 was conducted in the premises of the assessee on 12th December, 2002. During the proceedings, statements under Section 132(4) were .....

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o actually managed its employees and what were the services rendered to the assessee for which they received remuneration. Regarding the premises from where the two companies were shown to be functioning, AO gathered information by recording statements from the son of the builder/owner and it turned out to be that in one case the possession of the premises itself was not given and in the other case it was found during search action that the premise was used as godown of the Assessee company. The .....

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ac; that there was no documentary evidence available in support of the services rendered by Airwings also to earn the commission. He therefore disallowed the commission payment to above stated two companies for the block period 01.04.1996 to 12.12.2002. The assessing officer also added the commission/incentives received by the Airtrac directly from other companies holding that in fact the said commission/incentive was received by the assessee company which was diverted and shown as the income of .....

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enditure of the above stated two companies. The ld. CIT(A) however, deleted the addition by the AO in respect of commission/incentives directly by Airtrac from other parties holding that the same did not come within the scope of undisclosed income of Assessee for the block assessment. 6. Before us, the Ld. A.R. of the assessee has submitted that the AO has framed the impugned assessment order u/s 15BC r.w.s. 143(3) and has made the impugned additions relying solely on the retracted statements, r .....

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ements; Salary Register ; Communication from customers to M/s Airwings Travel & Cargo Pvt. Ltd. showing address of 4, SatamIndl. Estate; Sub- Agency agreement between M/s Airwings Travel & Cargo Pvt. Ltd. & M/s M.R. Cargo Pvt. Ltd.; Copies of Income Tax Returns, Challan of Profession tax etc.and further in relation to M/s Airtrac Agents (India) Pvt. Ltd.: the copy of agreement for purchase of office at Sahar Roy Appt. dated 23-02-1996.; Receipts of society charges paid; Bank statemen .....

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. Further that the recipients of the sub-commission had sufficient infrastructure to render the services to the assessee. That the AO has not discussed about the other rented premise which were in the occupation of those two companies, which were adequate to carry on the business by the two respective companies. The Ld. AR has further submitted that with regard to the employees functioning in these two companies, the muster roll, salary register, the employees' registration, the TDS Return w .....

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athered during the search and seizure proceedings and the statements recorded as explained above under Section 132(4). In the assessment proceedings pursuant to Section 143(3) read with Section 148, the aforesaid retraction was explained in the form of detailed letter as also the factual position with regard to the functioning of M/s Airtrac and M/s Airwings. On that basis the AO completed the assessment accepting the assessee's stand vide his assessment order dated 30th March, 2004. That no .....

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ecorded in the books of account in respect of which returns had been filed in the past and accepted by the Department scheme of assessment prescribed in Chapter XIV B will have no application. That it is essential to corroborate the statements recorded with the facts gathered during the course of the assessment proceedings and other evidences. The Ld. AR therefore, has concluded that additions solely on the basis of retracted statements without any incriminating material found during the search .....

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e Assessee. The ld AR has further made following written submissions in respect of points raised and case laws relied upon: GROUNDNO1-ITEMS OUTSIDE PURVEW OF BLOCK ASSESSMENT. 1) At the outset, no incriminating material/evidence found during course of search with regard to disallowance of commission paid to Airwings Travel and Cargo Pvt Ltd ₹ 1,12,58,843/- and Airtrac Agents (India) Pvt Ltd ₹ 70,77,867/- [CIT v. BHUVANENDRAN 303 ITR 235 (MAD) [PGS 5 OF JUDICIAL PRECEDENT PAPERBOOK (J .....

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JI v. DCIT DATED 27.12.2004 (MUM) [PG 143 OF JPPB]. 3) Expenditure not found to be false as a result of evidence found in search [RADAN v. DCIT 58 ITR 129 (MUM) [PGS 122 TO 126 OF JPPB]; EDULJI v. DCIT DATED 27.12.2004 (MUM) [PGS 135, 136 TO 143 OF JPPB]; SIGMA v. JCIT 102 lTD 342 (MUM) [PG 161 OF JPPB]; MANGE v. ACIT 105 TTJ 594 (DEL)(SB) [HN] [PGS 165 TO 167 OF JPPB]. 4) Commission payments are reflected in regular books of accounts and allowed in regular assessments since last several years a .....

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9 ITR 192 (MAD) [PGS 187, 188 OF JPPB]; AC v. PANDYA DATED 31.05.2004 (MUM) [PG 193 OF JPPB]; KAILASHBEN V. CIT 328 ITR 411 (GUJ) [PGS 206, 207 OF JPPB]; CIT v. OMPRAKASH 322 ITR 362 (BOM) [PG 211 OF JPPB]; VINOD v. UOI 233 ELT 157 (SC) [PGS 220, 221, 223, 224 OF JPPB]; CIT v. UTTAMCHAND 320 ITR 554 (BOM)] [PGS 230, 231 OF JPPB]. GROUND NO 2-VIOLATION OF NATURAL JUSTICE 6) Materials used by AO against Appellant not allowed to be tested by cross-examination and consequently, cannot be used as evi .....

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N MERITS AND QUANTUM TO BE INCLUDED. 9) Without prejudice and in any event, what can be assessed in block period is the net income after deducting expenses incurred by Airwings and Airtrac as per chart submitted. 7. The Ld. DR on the other hand relied upon the finding of the assessing officer and has further contended that since the statements were not recorded under coercion, hence the same were rightly relied by the AO. He has also objected to the deletion of addition by the CIT(A) in respect .....

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ompanies but has paid commission to various other parties. The Ld. AR in this respect has invited our attention to various documents placed in the paper book to show that the assessee company had been paying commission to various sub agents for procuring business for the assessee. The Ld. A.R. has also invited our attention to P & L Account of the Airwings as well as of the Airtrac and the various assessment orders for different assessment years wherein the said companies have consistently b .....

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irector and employees whose statements were recorded during search action had applied for copies of the statements which were provided to them only in the 2nd week of January 2004. After going through the statements, the said director and the employees found that the same were not correct and they immediately retracted the same by way of filing affidavits in this respect. The Ld. A.R. has further explained that any International Airline cannot deal with any non- IATA agents or even with exporter .....

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to the assessee various businesses and therefore the assessee company paid them commission/brokerage on the business introduced by them. The assessee company being IATA recognized agent was entitled to 5% commission from Airlines. Out of this, the assessee company was compelled to pay part commission to sub agents varying from 2.5% to 4.5%. It was explained that the Airwings Travel and Airtrac were just like other sub agents among other various sub agents to whom the assessee company had paid c .....

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ment year 1998-99 the assessee company paid a total commission of ₹ 18962963/- to almost 40 parties including Airtrac Agents and Airwings Travel. Similarly in the assessment year 1990-91, a total commission was paid to 55 parties totaling ₹ 12542523.14 out of which an amount of ₹ 958444/- was paid to Airwings Travel. The Ld. A.R. has further invited our attention to page 53 of paper book-1 to show that for the A.Y. 1991-92 the commission was paid to 54 parties totaling ₹ .....

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far as the contention of the Department that there was no infrastructure of employees available with the said sub agents, the Ld. A.R. of the assessee has brought our attention to the letters of the sub agents/above stated companies informing that they operated from the rented premises of the Airlift taken from the assessee. The Ld. A.R. in this respect has invited our attention to the respective rent deeds between the parties. He has also invited our attention to the accounts of the respective .....

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m that, the Ld. A.R. has also invited our attention to professional tax, correspondence, bank statements and salary sheet, gratuity paid vide cheques, TDS challans for respective salary paid to the employees as well as copies of the annual returns of the said companies to show that the said companies have the infrastructure and employees to render service to the assessee company. The Ld. A.R. has also invited our attention to the stamp duty paid agreement along with copies of society bills to sh .....

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lift India Ltd., which was an IATA cargo agent. It was also explained that the said concern had disposed off its premises in 1999 and since it was offering business to the Airlift India Ltd., the said company (assessee) permitted Airtrac to function from its premises on payment of rent. The Ld. A.R. has also invited our attention to the relevant part of the assessment order wherein the AO himself has mentioned that the question of commission payment, nature of services rendered and like matters .....

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ing the search action. We further find that even the Ld. CIT (A) in the impugned order has discussed that Airtrac had derived commission and incentives from other Air Lines also. The ld. CIT(A) has given a categorical finding that the AO had not brought any material on record in support of his conclusions that either these incomes relate to the same business in respect of which Assessee paid commission to Airtrac or to the effect that Assessee had diverted these incomes to Airtrac. The basis for .....

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