TMI Blog2017 (12) TMI 1529X X X X Extracts X X X X X X X X Extracts X X X X ..... lity, we are of the view that the addition made by the lower authorities is not sustainable. Hence the ground of appeal of the assessee is allowed. - ITA No.1232/Kol/2014 - - - Dated:- 26-12-2017 - Shri Waseem Ahmed, Accountant Member And Shri S.S.Viswanethra Ravi, Judicial Member For The Appellant : Shri Ravi Tulsiyan, FCA For The Respondent : Shri Saurbh Kumar, Addl. CIT-DR ORDER PER Waseem Ahmed, Accountant Member:- This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-XIX, Kolkata dated 09.04.2014. Assessment was framed by DCIT, Circle-36, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 31.12.2010 for assessment year 2008-09. Shri Ravi Tulsiyan, Ld. Authorized Representative appeared on behalf of assessee and Shri Surbh Kumar, Ld. Departmental Representative appeared on behalf of Revenue. Sole issue raised by assessee in this appeal is that learned CIT(A) erred in confirming the order of AO by sustaining the disallowance of ₹ 1,17,47,513 on account of commission expenses claimed by the assessee. 3. Briefly stated facts are that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove are recorded on pages 2 to 6 of the assessment order. The AO on the basis of statements recorded under section 131 of the Act was of the view that the services rendered by the parties have not been substantiated. The AO during assessment proceedings also issued notices under section 133(6) of the Act to 7 parties to whom the assessee has made sales during the year to check the veracity of the commission expenses. The list of parties stands as under : i) M/s Bhagwti Steel Enterprise ii) M/s Chhotaria Udyog Nigm iii) M/s Doharia Steel Industries Ltd iv) M/s Jai Balaji Industries Ltd. v) M/s Jai Balaji Industries Ltd. (A/c ARC) vi) M/s Jai Balaji Sponge Ltd (A/c ARC) vii) M/s Calcutta Steel Traders However all the parties have confirmed that no broker was involved in the business dealing with assessee. Similarly the Inspector was also deputed to verify the genuineness of commission expenses who also confirmed that no broker was involved. In view of above the AO allowed the commission expense of ₹ 1 lacs considering the earlier year commission expenses i.e. ₹ 23,232 only and disallowed the remaining commission expenses of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Bishandas Iron Works during the year 2007-08 iii) PAN no., receipt copy of IT Return for the AY 2008-09, computation of Tax and Balance Sheet for FY 2007-08. iv) Copies of their PAN cards, bank statements showing the commission receipt, IT returns, tax computations and Balance Sheets 8) The parties have also confirmed the above transaction and services rendered during the assessment proceedings and in response to the notice issued under section 131 of the Act. However the ld. CIT(A) disregarded the contention of the assessee and confirmed the order of AO by observing as under:- 4.4 On an analysis of the am order of the AO and the contention of the appellant as elucidated (supra) to substantiate its stand on the issue, my findings and decision thereon are as follows: The AO examined the parties u/s. 131 to whom Commission was paid and found that none of them could give details of the services rendered, none of them could give details of the parties to whom they were servicing. In one of the cases the party also admitted that the transactions was an accommodation entry. I find that the appellant was given a chance to cross examine the parties on 15/12/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ps held:- mere payment by itself would not entitle an assessee for deduction of the said expenditure unless the same was proved to be paid for commercial consideration. The onus of proof at all relevant times rests upon the assessee. The law does not prescribe any quantitative test to find out whether the onus in a particular case has been duly discharged. It all depends on the facts and situation of the case. The view expressed by their Lordships of the Calcutta High Court and that of the Gauhati High Court referred to above, is supported by the view of their Lordships of the Supreme Court in the case of Lachminaryan Madan Lal vs.cit [1972] 86 ITR 439. Their Lordships have held as under:- The mere existence of an agreement between teen the assessee and its selling agents or payment of certain amounts as Commission, assuming there was such payment, does not bind the Income-tax Officer to hold that the payment was made exclusively and wholly for the purpose of the assessee s business. Although there might be such an agreement in existence and the payments might have been made, it is still open to the Income-tax Officer to consider the relevant fats and determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ality of the materials in the market; to book the order of the materials as per specification before SAIL TATA and coordinate accordingly with SAIL T ATA for availability of the specified materials. Until last year due to fewer dealers in the market TAT A SAIL would themselves approach the assessee for orders, but now there was a need of initiative on the assessee's side; to help the assessee make payment as per offer of materials issued by SAIL TATA after taking into consideration the demand and price of the materials offered; to check for shortages, i.e to ensure that the quantity actually given by TAT A SAIL is not short of the quantity for which invoices have been raised 2.3 The assessee, however lacked the infrastructure to perform all of the above on its own and hence decided to outsource the 'above mentioned services. The conditions of increased competition coupled with a fluctuating market called for constant vigilance, which gave rise to the need for commission agents. 2.4 Moreover, in order to outperform the other dealers and secure maximum business from TATA SAIL it was necessary to maximise the sales. Therefore, commission agents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said documents are enclosed at pages 30-38, 59-83 of the paper book. A perusal of the same shall establish the receipt of commission together with the fact that the said commission was offered to tax in their returns. In rejoinder Ld. DR submitted that the amount of commission represents the bogus expense therefore the same is not eligible for deduction. On the other hand, ld. DR vehemently supported the order of the lower authorities. 6. We have heard the rival contentions and perused the materials available on record. The assessee has claimed an expense of ₹1,18,47,513/- under the head commission during the year. As per the assessee the amount of commission is not representing the commission for arranging/ procuring business for it rather it represents the payment against the services provided by them to the assessee. The services provided by the agents have already been elaborated in the preceding paragraph. Therefore the same are not repeated herewith for the sake of brevity. From the foregoing discussion we note certain undisputed facts which are as under:- 1. The genuineness of payment has not been doubted. 2. The parties/ agents to whom the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by either of the partners of ISC to the ITO, that did not mean that no services were rendered or to disbelieve the genuineness of the agreement for services or sales, as well as of the payment. Even payment had not been denied. Therefore, in such cases it could not be said that the finding of fact was perverse. When the finding of fact regarding rendering of service was not perverse, the payment of commission could not be disallowed. No interference was, therefore, called for in the order of the Tribunal. 6.1 We also note that Shree Gaurishankar Bajaj karta of Gaurishankar Bajaj Sons has duly admitted in his statement u/s 131 of the Act that he has rendered the services to the assessee as evident from question no. 14 its answer which reads as under:- Q4 Pl specify what kind of job you perform for earning Commission? Pl also state the names addresses of three main persons / cos./concerns for whom you perform this job. Ans.4 Deal in any kind of goods with two parties I received Commission from Bishandas Iron Works I lifting their iron wires lifted from Tata. Q5 : You have stated that you have worked for two parties in F.Y 2007-08. Pl state his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties was provided to the assessee for his rebuttal. No such notice was issued by the Revenue to the assessee for the appearance at the time of recording of statement of the above parties. It is well settled law that no statement can be used against the assessee without giving the opportunity as per the procedure of law. In this connection we rely on the judgment of Hon'ble Supreme Court in the case of Andaman Timber Industries vs. CCE, CA No. 4228 of 2006 (SC) (2015)127 DTR (SC) 241. In the said case, the Hon'ble Supreme Court held as under :- Not allowing the assessee to cross-examine the witness by the Adjudicating Authority principles of natural justice because of which the assessee was adversely affected. It statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note mentioned that such an opportunity was sought by the awe. However, no such Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief is followed by cross-examination and re-examination, if necessary. It is not just a question of form or a question of giving an adverse party its privilege but a necessity of the process of testing the truth of oral evidence of a witness. not form the basis of any inference against the adverse parties. It is trite law that cross-examination is the sine qua non of due process of taking put on notice of the case made out against him. He must be supplied the contents of against him. This necessarily also postulates that he should cross-examine the witness hostile to him. In the instant case, the first thing was that which of the statements of 'R' was correct, was anybody's guess. Therefore, it was necessary to delve out the truth from him and for that matter a cross-examination was necessary. Secondly, if upon as truthful, there would still remain the question of estimation of the profit. The profit on the basis of comparative cases. Therefore, it was the duty of the Assessing have the option to estimate the gross profit. Again, it is the comparative instance that be unreliable and requiring to be rejected. Therefore, in the interest of justice for both l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come under coercion/ undue influence. Keeping in view the guidelines issued by the CBDT from time to time regarding the statements obtained during search and survey operation, it is undisputedly clear that the lower authorities have not collected any other evidence to prove the impugned transaction as bogus other than the statement. Therefore under such facts circumstances we are inclined to disagree with the findings of lower authorities. 6.4 Besides the above we also note that it has been rightfully held in the case of Mukesh R. Marolia vs. Addl. CIT, Range-15(2) [2006] 6 SOT 247 (Mum), the Hon'ble ITAT, Bench 'F', Mumbai, that an assessment has to be completed on the basis of records and material available before the assessing authority. Personal knowledge and excitement on events should not lead the assessing officer to a state of affairs where salient evidences are overlooked. Further, The ITAT Mumbai in case of Chandrakant Babulal Shah Vs. AO [ ITA No.6108/Mum/2009 ] held that: In view of the documentary evidence in favour of the assessee, the contention of the AO based on the statement which is also unsupported by any other evidence to deny the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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