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Swarup Kumar Saha Versus J.C.I.T., Range-50, Kolkata

2016 (5) TMI 294 - ITAT KOLKATA

TDS u/s 194H - Disallowance u/s 40(a)(ia) - non TDS on commission expenditure - Held that:- Set aside this issue to the file of the Learned AO, to verify as to whether the payees have duly recorded the subject mentioned commission receipt in their returns and if so, in the light of second proviso to section 40(a)(ia) of the Act and in the light of the decision of the Hon’ble Delhi High Court in the case of CIT vs Ansal Land Mark Township (P) Ltd (2015 (9) TMI 79 - DELHI HIGH COURT ), the assesse .....

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and circumstances, the assessee had not proved the genuineness of the transactions of commission expenditure together 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 fac .....

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ncy 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 ₹ 14,39,550/- (11089550-9650000) being the salaries actually paid before the end of the previous year by the assessee, we deem it fit and appropriate, to meet the ends of justice, to al .....

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- Shri M. Balaganesh, Accountant Member, and Shri S.S.Viswanethra Ravi, Judicial Member For The Appellant : Shri K.M Roy, FCA, ld.AR For The Respondent : Shri Rajat Kr. Kureel, JCIT, ld.Sr.DR ORDER SHRI M.BALAGANESH, AM This appeal of the assessee arises out of the order of the Learned CIT(A)-15, Kolkata in Appeal No. 152/CIT(A)-15/14-15/R-50/Kol dated 08/01/2016 against the order of assessment framed for the Asst Year 2011-12 u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as th .....

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tion amounting to ₹ 3,55,76,533/-. The Learned AO observed that out of this receipt, a sum of ₹ 3,52,57,708/- was received by the assessee from M/s Sri Girija Prasanna Cotton Mills Ltd. The assessee submitted copy of the agreement dated 10.3.2009 between Sri Girija Prasanna Cotton Mills Ltd and the assessee. The said company was the owner of the land at Moujagarh Shyamnagar P.S.Jagatdal having total area of 10.315 acres. The said land was requisitioned under the West Bengal Land (Req .....

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ation 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 ob .....

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providing consultancy services and conducting cases in respect of matters relating to Awards & Compensation specially Land Acquisition Matter on contractual basis since long. In respect to such land acquisition of case Girija Prasanna Cotton Mills Ltd , represented by its Director, who is the land loser and claimant, approached the assessee for consultation of their land acquisition case being No. L.A.II/79(N) of 1978-79 in respect of land at Mouzagarh Shyamnagar, North 24 Parganas. After co .....

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s made by the concerned L.A. Collector on 11.3.1998. It was also mentioned that all the expenses were incurred by the assessee. The company being aggrieved by the compensation award , the claimant (i.e Girija Prasanna Cotton Mills Ltd) further requested and contracted the assessee to conduct the said case and as per direction proceeding under section 18 of the Land Acquisition Act was started in the Reference Court being L.R.A. Case No. 27 /1998, which was decreed after six years by the Land Acq .....

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e judgement and decree dated 31.5.2004 of the Land Acquisition Court at Barasat, the State of West Bengal preferred an appeal in the Hon ble High Court at Calcutta against which a Cross Appeal being FAT No. 382 of 2005 and CAN No. 3009 of 2005 was preferred by the assessee on behalf 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. .....

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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 with the L.R.A. No. 27/98(v) & Exe .....

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ty shall sign the necessary Vokalatnames and execute other documents to conduct and/or to contest the case before the L.A. judge Barasat, High Court, Calcutta and Supreme Court of India. 6. That the First Party will pay 30% (thirty five) of the total enhanced compensation including interest and all others statutory allowances etc. which will be decreed by the L.A. judges, Barasat and/or to be decreed by the appellate Court. 7. That, if necessary, the Second party may enter into agreement with ot .....

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e issued by the Learned AO u/s 133(6) of the Act, M/s Girija Prasanna Cotton Mills Ltd submitted the copy of the agreement dated 10.3.2009 before the Learned AO. It was further observed that the Sl.No. of the Stamp Paper was 28AA 057957. Whereas the copy of agreement supplied during the appellate proceedings was dated 24.4.2009 and Sl.No. of the Stamp Paper was 27 AA 895798. Thus , the Learned CIT(A) observed that there are two exactly similar worded agreements on record of two different dates. .....

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any @ 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 exp .....

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for commission. Even the addresses of these parties together with their PAN details were not provided by the assessee for cross verification by the Learned AO. The Learned CIT(A) observed that no fresh arguments or evidences were filed by the assessee in this regard before him and accordingly upheld the disallowance made by the Learned AO. Aggrieved, the assessee is in appeal before us on the following ground:- 1) For that on the facts and in the circumstances of the case, CIT(A) has erred in su .....

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rival submissions. We find that the disallowance of commission to the tune of ₹ 55,67,385/- has been made only u/s 40(a)(ia) of the Act for non-deduction of tax at source in terms of section 194H of the Act. In the facts and circumstances, we deem it fit and appropriate, to set aside this issue to the file of the Learned AO, to verify as to whether the payees have duly recorded the subject mentioned commission receipt in their returns and if so, in the light of second proviso to section 4 .....

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e assessee is allowed for statistical purposes. 3. The next ground to be decided in this appeal is as to whether the Learned AO is justified in disallowing a sum of ₹ 1,20,00,000/- towards commission expenditure incurred on three parties in the facts and circumstances of the case. 3.1. The assessee incurred commission expenditure to be paid to the following three parties :- Mr.Subhash Sahu 40,00,000 Tax deducted ₹ 4,00,000 Mr.Subrata Biswas 40,00,000 Tax deducted ₹ 4,00,000 Mr. .....

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sion 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 also found that Mr. Subrata Biswas is brother in law of the assess .....

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ted the commission expenditure of 3 parties to the tune of ₹ 1,20,00,000/- as bogus and disallowed the same. On first appeal, the Learned CIT(A) observed that the assessee was not able to controvert any of the findings given in the assessment order by the Learned AO. The assessee submitted the following documents before the Learned CIT(A) to justify his claim of deduction :- (a) Letter of engagement given by the assessee appointing Mr.Satyabrata Biswas as lawyer on record to handle the lan .....

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d dated 7.6.2009 duly signed by the assessee. 3.1.1. The Learned CIT(A) observed from the bank statements submitted by the assessee that the following payments were made by the assessee :- Sri Subhas Sahu 7.4.2011 40,00,000 Sri Subrata Biswas 19.4.2011 26,00,000 Sri Satyabrata Biswas 29.3.2011 25,00,000 Sri Satyabrata Biswas 26.3.2011 10,00,000 The Learned CIT(A) observed that the assessee had not taken into account the payments made by him before 31.3.2011 in his books of accounts and instead r .....

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abrata 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 .....

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The Learned CIT(A) went to investigate the income tax returns of these three parties viz Sri Subhas Sahu , Sri Subrata Biswas and Sri Satyabrata Biswas and found that they have debited expenses towards salaries and wages and other expenses and had shown meager taxable income in their returns as under for Asst year 2011-12 :- Name Commission Credited Salary & Wages Taxable Income Sri Subhas Sahu 40,00,000 32,70,750 4,78,604 Sri Subrata Biswas 40,00,000 34,91,650 4,95,280 Sri Satyabrata Biswas .....

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ee had colluded with him in diverting taxable receipts. The Learned CIT(A) further observed that the assessee had not provided evidences in the form of academic qualifications of these persons to prove as to whether they are actually competent to render the professional legal services as claimed by the assessee. From 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 n .....

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rasad 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 Learn .....

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roved the genuineness of the transactions of commission expenditure together 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 as .....

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was in receipt of commission / consultancy charges to the tune of ₹ 3,55,76,533/- and out of this, amount received from M/s Girija Prasanna Cotton Mills Ltd on 22.3.2011 was to the tune of ₹ 3,52,57,708/-. Against this commission receipt, the assessee also debited salaries and wages to the tune of ₹ 1,10,89,550/- and claimed the same as deduction. The Learned AO asked for the details of the same together with the fact as to whether any PF and ESI were deducted and remitted on t .....

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asat, 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 .....

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d did not contain date wise details of payments made on behalf of the assessee. Accordingly he rejected those affidavits and did not admit even as an additional evidence. He also held that the contents in the affidavits are false in view of the fact that had the salaries been paid by his wife and son on behalf of the assessee, then the same should have been reflected in the books of accounts of the assessee and salary outstanding as on 31.3.2011 would have come down by ₹ 80,00,000/- as aga .....

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1-12 , 2012-13 and 2013-14 of the assessee that the salary & wages was outstanding as below:- A.Y. Salary & wages debited Actually Paid Out of outstanding outstanding 2011-12 1,10,89,550 96,50,000 2012-13 5,32,410 16,50,000 80,00,000 2013-14 2,06,500 29,50,000 60,00,000 4.2.2. Hence he 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. 4.2.3. It was furth .....

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wing ground :- 3) For that Ld'CIT(A) has erred in confirming disallowance of ₹ 1,10,89,550/- without examining the veracity of affidavits. 4.3. The Learned AR reiterated the submissions 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 ac .....

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respondence 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 assessee had merely used the names of his relatives to divert his taxable income to their hands and they in turn had show .....

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d did not contain date wise details of payments made on behalf of the assessee. We find that the said affidavits did not even contain the basic fact as to whether the wife and son of the assessee were assessed to income tax and the details of their PAN together with income tax particulars were absent conspicuously. When a person files an affidavit stating that he / she has incurred ₹ 40,00,000/- on behalf of the assessee, then he / she should have definitely income on his / her own volitio .....

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ome down by ₹ 80,00,000/- as against ₹ 96,50,000/- . Moreover the Learned CITA also found that the list containing the names of 65 persons mentions that the salary is payable as on 31.3.2011. Hence the contents of the affidavits are proved wrong by the entries in the books of the assessee and the details filed by the assessee. We find that the Learned CITA further observed from the income tax returns of Asst Years 2011-12 , 2012-13 and 2013-14 of the assessee that the salary & wa .....

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