TMI Blog2016 (5) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... ether with the nature of services rendered by those 3 parties except self serving letter of engagement given by him to them. Even no evidence was furnished to prove as to whether such letter of engagement was indeed acknowledged by those three parties. The academic qualifications to prove the competency level of those three parties could also not be proved by the assessee. In these facts and circumstances, we find that the assessee had merely tried to use the names of his relatives and others to divert his taxable receipts and hence we find no infirmity in the order of the Learned CIT(A) - Decided against assessee. Disallowance of salary expenditure - Held that:- taking into account, the nature of activities of the assessee, it is highly improbable and impractical to conclude that the assessee could have carried on all the activities on its own to earn the consultancy charges / commission income. Definitely he requires the assistance of certain employees for carrying out certain secretarial activities and taking in view the totality of the facts and circumstances and more especially in view of the fact that no adverse remarks were made by the Learned AO in respect of ₹ 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Acquisition Collector. It was also mentioned that the company appointed Shri Swarup Kumar Saha (assessee herein) , to represent its case in the Land Acquisition Court upto Hon ble High Court and Supreme Court at the cost of the second party. The company agreed to pay 30% commission of the total enhanced compensation to the assessee. Final compensation awarded to the company was ₹ 11,75,25,964/- and out of this, ₹ 3,52,57,708/- was paid to the assessee as commission on 22.3.2011. After deducting tax at source of ₹ 35,25,771/-, the company paid ₹ 3,17,31,937/- to the assessee which is found credited in the bank account of the assessee. Against this commission receipt, the assessee debited expenses towards commission payments , salary payments and other expenses. The Learned AO observed that the assessee has totally paid commission to 19 parties amounting to ₹ 1,94,05,385/- and out of this, a sum of ₹ 55,67,385/- paid to 13 parties were without deduction of tax at source. The Learned AO doubted the genuineness of the said commission expenditure and disallowed the same u/s 40(a)(ia) of the Act for violation of TDS provisions u/s 194H of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his clients Girija Prasanna Cotton Mills Ltd. Later the Hon ble Calcutta High Court passed an order dated 18.5.2005 wherein it was directed to pay an amount to the claimant by the Government of West Bengal. 2.2.1. The assessee further placed a copy of agreement dated 24.4.2009 between him and M/s Girija Prasanna Cotton Mills Ltd. The operative portion of the agreement as reproduced in the Learned CIT(A) order is as under:- 1. The First Party hereby appoint the Second Party Dated 13.03.2009 to conduct the reference case before the L.A. Court, the appeal before the Hon 'ble High Court, Calcutta and the Supreme Court of India, the execution proceeding and the pursue the matter before the L.A. Collector. 2. That the Second Party will conduct case/cases pending before Reference Court, The Hon 'ble High Court, Calcutta at the cost of Second Party including all expenses for Advocates's fees solietor fees and fees of other agents ad they think fit and if necessary to contest the case before the Hon 'ble Supreme Court of India. Delhi at the cost of the Second party. 3. The Second Party will conduct the said L.A. Case No. I.A. II/79(N) of 78-79 along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipt of ₹ 3.52 crores from M/s Girija Prasanna Cotton Mills Ltd by the assessee becomes doubtful. He also observed that the commission paid by the said company @ 30% of enhanced compensation is too excessive and not heard off as paid in genuine land acquisition cases. The Learned CIT(A) summarized the events and found that the assessee has offered ₹ 3,55,76,533/- as consultancy charges received from M/s Girija Prasanna Cotton Mills Ltd and against it, debited various expenses to the tune of ₹ 3,34,50,908/- to earn this income and offered the profit for taxation to the tune of ₹ 21,25,625/-. He proceeded to examine the claim of expenditure of the assessee in the light of the aforesaid background. 2.2.2. With regard to disallowance u/s 40(a)(ia) of the Act in respect of commission expenditure claimed by the assessee to the tune of ₹ 55,67,385/-, it was observed that these amounts were not actually paid to the 13 parties before the end of the previous year. It was further observed that the assessee was not able to produce any evidences to prove the nature of services rendered by these 13 parties to make them eligible for commission. Even the addresses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahu 40,00,000 Tax deducted ₹ 4,00,000 Mr.Subrata Biswas 40,00,000 Tax deducted ₹ 4,00,000 Mr.Satyabrata Biswas 40,00,000 Tax deducted ₹ 4,00,000 Apart from this, the assessee also incurred commission expenditure to be paid to Mr.Sakti Prasad Chakraborty ₹ 2,78,000/- (Tax deducted ₹ 27,800/-) ; Mr.Debayan Bera ₹ 9,00,000/- (Tax deducted ₹ 90,000/-) and Mr.Nirmal Chandra Ojha ₹ 6,60,000/- (Tax deducted ₹ 66,000/-) , which were accepted as genuine by the Learned AO and allowed as deduction. With regard to the claim of deduction towards commission expenditure of ₹ 1,20,00,000/- in respect of three parties, the Learned AO made independent verification from their respective income tax returns and found that the same had been duly disclosed as income in the returns of the payees but found that the assessee had not furnished any evidences with regard to nature of services rendered by these 3 parties to make them eligible to receive service charges from assesssee. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he financial year. It was further observed that the assessee claimed to deducted tax at source as per the TDS certificates dated 22.5.2011 filed by the assessee with regard to these three parties , the following sums were deducted as tax at source:- Name Amount credited Tax deducted Amount payable should be Sri Subhas Sahu 40,00,000 4,00,000 36,00,000 Sri Subrata Biswas 40,00,000 4,11,415 35,88,585 Sri Satyabrata Biswas 40,00,000 4,00,000 36,00,000 3.1.2. The Learned CIT(A) observed that the assessee had manipulated his books of accounts by showing the wrong figure of ₹ 40,00,000/- each as amounts payable in his books of accounts. He accordingly concluded that the asesssee had wrongly shown that TDS was deducted but whereas no tax has been deducted on this expenditure. Based on these observations, he found that the books of accounts are not all reliable and liable to be rejected. He further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om their returns, it was noticed that they had received professional fees only from the assessee. The Learned CIT(A) accordingly concluded that the genuineness of the expenditure was not proved by the assessee by way of supporting evidences and upheld the action of the Learned AO. Aggrieved, the assessee is in appeal before us on the following ground :- 2) For that Ld'CIT(A) has erred in sustaining disallowance of Rs. ₹ 1,20,00,000/- towards commission without errors- examining the pages. 3.2. The Learned AR reiterated the submissions made by him before the lower authorities. He further argued that the Learned AO having accepted the commission payments to Mr.Sakti Prasad Chakraborty ₹ 2,78,000/- (Tax deducted ₹ 27,800/- ) ; Mr.Debayan Bera ₹ 9,00,000/- (Tax deducted ₹ 90,000/-) and Mr.Nirmal Chandra Ojha ₹ 6,60,000/- (Tax deducted ₹ 66,000/-) , as genuine, ought to have allowed the commission expenditure of ₹ 1,20,00,000/- as genuine as the same has been subjected to TDS. In response to this, the Learned DR argued that the fact of deduction of tax at source itself is in dispute as could be seen from the Learned CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that address of most of the employees are same as that of the assessee i.e 40C/1, Jessore Road, Barasat, Kol-124. He further observed from the details filed by the assessee that out of 73 employees, payments made to 66 employees are in the nature of labour payments and generally the labour payments are made on a weekly basis , it is very unlikely that these are shown as outstanding liabilities as on 31.3.2011. Based on these observations, he disallowed the entire salaries and wages debited to the tune of ₹ 1,10,89,550/- u/s 37(1) of the Act. 4.2. Before the Learned CIT(A), the assessee came up with a new explanation that the salaries and wages were paid by his wife Smt.Shikha Saha to the tune of ₹ 40,00,000/- and his son Sri Avishek Saha to the tune of ₹ 40,00,000/- on his behalf and claimed that the genuinity of the salary payment is proved beyond doubt. He also placed independent affidavits from his wife and son before the Learned CIT(A). The Learned CIT(A), however, did not give weightage to those affidavits as according to him the same were only self-serving and did not contain date wise details of payments made on behalf of the assessee. Accordingly he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons made by him before the lower authorities. He further argued that the Learned AO having accepted that the balance outstanding on account of salary and wages was only ₹ 96,50,000/- as on 31.3.2011, ought to have granted deduction of ₹ 14,39,550/- ( 11089550-9650000) atleast to the extent of actual payment made. He further argued that the affidavits filed by wife and son of the assessee were never examined by the Learned CITA by admitting the same as additional evidences. In this regard , he relied on the decision of the Hon ble Allahabad High Court in the case of L.Sohan Lal Gupta vs CIT reported in (1958) 33 ITR 786 (All) , wherein it was held that the tribunal had rejected the affidavit on the mere ground that there was no documentary evidence in corroboration in the form of any correspondence or otherwise on this point. Accordingly, it was held that the assessee was entitled to assume that the IT authorities were satisfied with the affidavit as sufficient proof on this point. 4.4. In response to this, the Learned DR argued that the fact of deduction of tax at source itself is in dispute as could be seen from the Learned CIT(A) order and argued that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012-13 5,32,410 16,50,000 80,00,000 2013-14 2,06,500 29,50,000 60,00,000 The Learned CIT(A) had observed that despite lapse of two years, the amount of ₹ 60,00,000/- was appearing as outstanding in the books of the assessee which showed that the transactions are not genuine. Moreover, it was further observed that the balance sheet of the assessee does not show Mrs.Shikha Saha (wife of assesseee) and Sri Avishek Saha (son of assessee) as creditors either in Asst Years 2011-12 or 2012- 13 or 2013-14. We find that the Learned CIT(A) had given logical reasons for rejecting the affidavits of wife and son of the assessee and accordingly did not admit the same as additional evidences. Accordingly, the case law relied upon by the Learned AR on the decision of Hon ble Allahabad High Court (supra) is squarely distinguishable and not at all applicable to the facts of the instant case. However, taking into account, the nature of activities of the assessee, it is highly improbable and impractical to conclude that the assessee could ..... X X X X Extracts X X X X X X X X Extracts X X X X
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