TMI Blog2016 (5) TMI 1490X X X X Extracts X X X X X X X X Extracts X X X X ..... es for sale of property based on some symbolic MOU deserves to discredited. The genuineness of the expenditure incurred is not at all proved. The initial examination of Shri B.S. Agarwal clearly shows that Shri B.S. Agarwal did not play any role in the land deal. Thus, payment of exorbitant amount of ₹ 90,00,000/- towards commission on some mundane MOU without exhibition of services is an utter improbability and does not stand to any reason. The assessee has not discharged initial burden of proof which squarely lies upon him to reasonably establish receipt of services. The receipt by payee can be for variety of reasons both gratuitous and non-gratuitous. The payment of taxes paid by the recipient though a mitigating factor, by itself will not render the corresponding expenses as sacrosanct. The assessee is under obligation to discharge the burden to reasonably prove the bonafides of expenses claimed. The Hon'ble Supreme Court in the case of CIT v. Durga Prasad More [1971 (8) TMI 17 - SUPREME COURT] has held that the taxing authorities are not required to put on blinkers while looking at the documents produced before them. They are entitled to look into the surround ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reveal any relevant details in connection with the impugned land transactions. The Assessing Officer further observed that in justification of the exorbitant commission paid to him, Shri Agarwal submitted that he rendered various intricate services in connection with settlement of light bills of MSEB, water bills and corporation's tax. However, he could not furnish primary details in corroboration of such averments such as quantum of such bills etc.. The Assessing Officer further observed that purchaser of the plot denied any commission agent between the assessee and the buyer party. On the basis of aforesaid facts, the Assessing Officer came to the conclusion that the recipient of purported commission Shri B.S. Agarwal has not played any role in plot deal between the assessee and the purchaser M/s. Dynalog (India) Ltd. and held that the payment in the form of commission is not found to be genuine. The Assessing Officer accordingly disallowed the commission paid of ₹ 90,00,000/- and added the same to the total income of the assessee. 4. The assessee agitated the order of the Assessing Officer before the CIT(A). The assessee filed certain additional evidences in the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a total consideration of ₹ 3 crores. Accordingly, they have entered into a second MOU dated 15.08.2008. Thus, in pursuance of MOU entered between the assessee and the commission agent, ₹ 90,00,000/- were paid to Shri Agarwal out of receipt of the sale consideration of ₹ 3 crores. The Ld. AR, thereafter, adverted our attention to the income-tax returns filed by the recipient of the commission agent and submitted that the recipient also has paid taxes at the maximum marginal of rate of taxes and therefore there is no avoidance of taxes per se. The TDS also has been deducted by the assessee while making the payment. He, thereafter, submitted that the averments made in the statement recorded under section 131(1) are in no way incriminating against the assessee. As per Question No. 17 of the statement, it is clear that MOU was entered with the assessee for this purpose and the terms and conditions were also provided in the statement as well as in the MOU. Non-explanation of certain information at the spur of moment will not vitiate the transactions per se. He relied upon the decision of the Hon'ble Supreme Court in the case of CIT v. Glaxo Smithkline Asia (P.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - MEMORANDUM OF UNDERSTANDING THIS MEMORANDUM OF UNDERSTANDING IS MADE AND EXECUTED AT BHOSARI, PUNE ON THIS 17th DAY OF APRIL IN THE YEAR 2008. BETWEEN Mr. Ishwarchand Ramdhari Agarwal, Age: Adult, Occupation: Business, R/at: Ram Vatika Apte Colony, Behind Ayappa Mandir, Bhosari, Pune - 411 039 and Mr. Rajendra Chandrabhan Gupta, Age: Adult, Occupation: Business, R/at; 84, Hermesh Heritage Shastrinagar, Yerwada, Pune - 411 006, both partner of M/s. Devchhaya Industries, a partnership firm having its Regd. Office W-189, M.I.D.C., Bhosari, Pune-411026. ........................Party of the first part AND Mr. Balkishan Sadhuram Agarwal, Age Adult, Occupation: Business, R/at Gavali Nagar, Near Rajgurunagar Bank, Bhosari, Pune - 411 039 ........................ Party of the second part WHEREAS all that piece and parcel of the plot No. T -80, bearing area of the plot is 3984 sq.. mtr., situated in T-Block M.I.D.C., Pimpri Industrial Area, Pune. AND WHEREAS party of the first part is the owner of the property mentioned below. AND WHEREAS It is hereby agreed between party of the first part and party of the second part the above mention property is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ₹ 2 crore. The MOU also mentions that Shri B.S. Agarwal shall have the responsibilities to remove illegal encroachments and other services as noted in the MOU. The notable feature are that the Assessee has not cared to secure any earnest money or any upfront payment to enforce the commitment to purchase the property in the event of failure to find buyer for the property. This is on the face of the fact that the beneficiary of commission has no expertise or skill or knowledge on the subject as noted later. Thus, no control or command over the recipient of commission emanates from MOU for enforcing it. Another point which is worth noting here is that in the event of failure to perform the obligations cast upon Shri B.S. Agarwal, the assessee has no legal recourse available against him. The MOU is totally silent on such a crucial aspect. Therefore, the assessee is in no way compensated in the event of the other party refusing to meet the obligations. No person of average intelligence and ordinary prudence would enter into such an MOU except for extraneous reasons. The MOU is not loaded with any authority to enforce the purported commitment. Therefore, the inference is inescapa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny amount to Shri Gomde for such services. In sum and substance, as made out in the statement under S. 131 dated 14.10.2011 [page No. 41-42 of paper book], witness Shri B.S. Agarwal admitted that except for the settlement of bills pertaining to MSEB bills, corporation taxes and water bills, etc.. he was not privy to any details and negotiations. With regard to details of payment against the land deals also, Shri B.S. Agarwal drew total blank and submitted that he is known to selling party i.e. assessee only. He also categorically admitted that he did not meet the purchasing party at all. Thus, entire conduct is inexplicable. Thus, from a reading of the statement, it is apparent that Shri B.S. Agarwal who has been merrily allowed to appropriate large chunk of surplus from land deal has no clue about the transactions at all. He also made confession to the effect that he did not met the buying party at all. The witness thus produced by the Assessee before the AO was found to be totally novice and to be a person of no understanding on the subject to cater to such deal. He has miserably failed to establish that he was involved in the transactions in any manner. He was neither instrument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. When the statements deposed before the AO are read as a whole, they do not inspire any confidence in the bonafides of engagement of Shri B.S. Agarwal in the deal involving amount of the magnitude of ₹ 3 crores where he is also a purported beneficiary of an amount as higher as ₹ 90 lacs. The commission recipient was found wanting even on very basic aspects of the subject matter at the first instance. He has displayed alarming show of lack of knowledge on the transaction. Also, there is a disturbing disconnect between the windfall gain of ₹ 90 lacs alleged to be paid towards services for sale of property and the background or capabilities of the middle man to execute deal of such formidable amount. There is no corroboration for involvement of the middlemen in the deal except the MOU which is found to be illusory and lacks in material features. The buyer has also not vouched the deal. Payment of such astounding sum to a person having as little understanding of the subject as possible neither accords with any business practice nor is corroborated by any direct or circumstantial evidences. It only militates against any logic. Which are those other parties who were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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