TaxTMI 
TaxTMI 
2007 (3) TMI 409
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.... failed to produce M/s. Drill Rock Engineers, Hyderabad along with their books, bank statements and statement of details of services rendered by them and that the commission paid to M/s. Drill Rock Engineers Pvt. Ltd. was only an adjustment in the accounts and that agents were not informed whenever the commission amount was credited to their account and thereby in upholding the disallowance of the commission of Rs. 12,94,673 made by the DC. 2. The Commissioner (Appeals) has erred in law and on facts in stating that out of the total amount of Rs. 4,69,865 paid as commission to M/s. Mindril Services, only Rs. 1,67,801 was paid by cheque and the balance was mere adjustment entry since your appellants have neither sent any credit notes or debit notes nor have the agents raised any bills for the commission and thereby upholding the disallowance made by the DC. 3.1 The Commissioner (Appeals) has erred in law and on facts in holding that your appellants had not been able to produce any evidence as proof for the services rendered by the business agents. 3.2 The Commissioner (Appeals) has erred in law and on facts in holding that your appellants have failed to sub....
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....d to prove the genuineness of these transactions. The assessee filed an appeal before the Commissioner (Appeals) against the said order of DCIT wherein certain evidences were produced for the first time and the learned Commissioner (Appeals) vide its order dated 26-3-1990 restored the matter regarding the point of third party commission to assessing officer with the directions to examine further and reframe the assessment accordingly. The learned Commissioner (Appeals) gave specific directions to assessing officer to make local enquiries to verify the fact of rendering of services. 6. In the assessment proceedings, in compliance to Commissioner (Appeals)'s directions under Section 250, the assessing officer required the assessee to furnish the details regarding nature of services rendered by M/s Drill Rock Engineers and M/s Mindrill Services. The assessee furnished the necessary details. The assessing officer noted that as against payment of commission of Rs. 12,94,673 and Rs. 4,69,842 respectively to Drill Rock Engineers and M/s Mindrill Services, these parties confirmed the amount of Rs. 8,64,709 and Rs. 2,49,634 respectively. Interim report from the assessing officer of t....
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...., a presumption could be drawn in favour of the assessee. The learned counsel, thereafter, contended that the learned Commissioner (Appeals) directed the assessing officer to carry out local enquiry which had not been done by the assessing officer, hence, the assessing officer in making the additions again did not comply with the directions of the learned Commissioner (Appeals). The learned counsel, thereafter, contended that all the material documents and evidences were furnished to the assessing officer though these were not considered by the assessing officer and wherever these were considered, these were misconceived e.g., the assessing officer noted that the assessee was having stockists, so there was no necessity to pay commission, however, the fact was that both these parties were stockists who earned commission on sales directly made by assessee-company as a result of their efforts and profit by way of discount on the purchases/sales made by them. The learned counsel, thereafter, took us to various pages of the paper book and in particular to pages 37, 42 to 48, 67 to 71, 118 and 119 to establish the fact of services rendered by these parties, the methodology of settlement ....
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.... functions of these agents were of such nature were to get the business due to intense competition between various players in this segment and made a categorical statement that provisions of Explanation to Section 37(1) were not attracted. Regarding frequent change of stockists/commission agents, the learned counsel contended that these decisions were commercial decisions and fell outside the jurisdiction of assessing authorities, however, to substantiate its claim, the learned counsel further explained that the machinery sold by the assessee was movable and shifted to different locations by the parties who purchased the same and depending upon the requirements of that locations, new agents were appointed and in other locations, where there was no business, the agreements were terminated. 10. We have considered the submissions made by both sides, material on record and orders of authorities below. Admittedly, the assessee is a leading manufacturer of the products. The assessee, is in this line of business for the number of years and allowance of commission in the earlier years paid by the assessee in the same manner is not in dispute. It is also not in dispute that sales made by....
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....A) cannot be said to have caused any prejudice to the interests of the assessee, and claim of the assessee, which, in our opinion, has been correctly rejected by the learned Commissioner (Appeals), hence, this ground is dismissed. 13. In the result, the appeal filed by the assessee stands partly allowed. ITA No. 7280/Bom./95 for assessment year 1986-87 14. In this appeal, following effective grounds are raised: 1.1 The learned Commissioner (Appeals) V, Bombay (hereinafter referred to as 'Commissioner (Appeals)') has erred in law and on facts in holding that your appellants had not been able to produce any details/evidence as proof for services rendered by the Third Party Commission agents and A have thereby claimed bogus expenses in the sum of Rs. 17,64,538 in the name of Third Party Commission. 1.2 The Commissioner (Appeals) erred in law and on facts in stating that the Third Party Commission agents have not made any correspondence with the purchaser of goods of your appellants and thereby arriving at an arbitrary conclusion that the intention of your appellants was to conceal the income to the tune of Rs. 17,64,538 and has arrived at a conclusion t....
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.... that the amount of Third Party Commission was reduced in the computation of income under Section 154 with the remark, Third Party Commission set aside for further examination'. 1.2 The Commissioner (Appeals) has erred in law and on facts in upholding the decision of DC that after the set aside order, the order has to be passed under Section 143(3) and not under Section 154. 2.1 The IT(A) has erred in law and on facts in rejecting your appellants submissions that the issue of commission was already decided in your appellants favour vide the order dated March 21, 1991 passed the DC. 2.2 The Commissioner (Appeals) has erred in law and on facts in rejecting your appellants submissions that the order dated March 29, 1993 passed by the DC is tantamounting to readjudicating an issue because of change in the opinion of the incumbent in the office of the DC. 3.1 The Commissioner (Appeals) has erred in law and on facts in holding that the amount of Third Party Commission payable by your appellants is not for any services rendered by the business agent. 3.2 The Commissioner (Appeals) has erred in law and on facts in holding that your appellant....
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....d on facts in holding that your appellants had not been able to produce any details/evidence as proof for services rendered by Third Party Commission agents and have thereby claimed bogus expenses in the sum of Rs. 19,96,038 in the name of Third Party Commission. 1.2 The Commissioner (Appeals) has erred in law and on facts in stating that the Third Party Commission agents have not made any correspondence with the purchaser C of goods of your appellants and thereby arriving at an arbitrary conclusion that the intention of your appellants was to conceal the income to the tune of Rs. 19,96,038 and in thereby confirming the order passed by the assessing officer levying penalty in the sum of Rs. 20,95,840. 1.3 The Commissioner (Appeals) has erred in law and on facts in stating that the enquiries made by the assessing officer under Sections 133 and 131 of the Income- tax Act, 1961 was brought to the notice of your appellants. 1.4 The Commissioner (Appeals) has erred in law and on facts in rejecting your appellants submissions, the reliance placed on statutory judicious binding precedents, and in treating the same as not applicable to your appellants case on an ....
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....6,85,135 to the total income of your appellants. 2.2 The Commissioner (Appeals) ought to have accepted your appellants submissions that excise duty and sales tax collected by your appellants do not and cannot for part of the total turnover for the purpose of calculating deduction under Section 80HHC of the Act. He has thereby failed to appreciate that the taxes collected by your appellants are only in the capacity of agents and that it does not and cannot for part of your appellants total turnover. 2.3 The Commissioner (Appeals) has failed to appreciate that since no excise duty sales-tax element is included in exports and therefore, while comparing the total turnover to export turnover for the purpose of computation of export profits, the two turnovers should be comparable with each other. 3.1 The Commissioner (Appeals) has erred in law and on facts in upholding the decision of the DC that for the purpose of calculating deduction under Section 80HHC, Rs. 63,83,390 should be considered as 'Business Profits' instead of Rs. 1,31,21,990 as determined by the DC in his assessment order. 4.1 The Commissioner (Appeals) has erred in law and on fa....
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.....1 The Commissioner (Appeals) has erred in law and on facts in not taking cognizance of the revised claim of deduction made by your appellants under Section 80HH of the Act. 8.1 The Commissioner (Appeals) has erred in law and on facts in not taking cognizance of the revised claim of deduction made by your appellants under Section 80-I of the Act. 9.1 The Commissioner (Appeals) has erred in law and on facts in holding that the amount of Rs. 2,07,855 has already been allowed as a deduction from the total income. The Commissioner (Appeals) has failed to take note of the DCs contentions that the same will be allowed as a deduction only in the year in which your appellants actually write off the amount. 10.1 Relief : Your appellants, therefore, respectfully pray that - the appellate order dated January 20, 1995 passed by the Commissioner (Appeals) may please be modified to the above extent, and any other reliefs deemed necessary may please be granted. 27. The facts relating to Ground No. 1, in brief, are that the assessee made a provision of Rs. 6,49,239 of warranty claims of the customers. The figure of warranty claims was arrived at on the basis ....
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....the assessee has challenged the inclusion of Excise Duty, Sales Tax and charges in the total turnover of the assessee for the purpose of computation of deduction under Section 80HHC. Both the parties agreed that Excise duty/Sales Tax could not be included into the total turnover of the assessee in accordance with the decision of the Hon'ble jurisdictional High Court in the case of CIT v. Sudarshan Chemicals Industries Ltd. (2000) 245 ITR 7691 (Bom.). Accordingly, this part of the ground is accepted. As far as conversion charges are concerned, the same have been included in the profits of the business and are an integral part of export activities and also have an element of turnover, therefore, the same are includible in the total turnover of the assessee as held by Hon'ble Bombay High Court in the case of CIT v. Bangalore Clothing Co. A. Accordingly, the contentions raised by the learned counsel in this regard are rejected and this part of the ground is decided against the assessee. In the result, ground No. 2 stands partly allowed. 32. In Ground No. 3, the issue is regarding whether the assessee should get deduction under Section 80HHC on the returned profit or assessed....
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....e the amount unless the claim of the assessee was accepted by the concerned authorities. Accordingly, the learned counsel contended that CCS had not accrued to the assessee and, therefore, the same was not liable to be taxed in the year under consideration. 35. The learned D.R., on the other hand, placed strong reliance on the order of assessing officer. 36. We have considered the submissions made by both sides, material on record and orders of authorities below. Admittedly, the assessee is following mercantile system of accounting but merely on this basis every claim cannot be set to have accrued to the assessee rather it is the accrual of income based upon specific terms and conditions of a claim/or contract which is offered as income on accrual basis under the mercantile system of accounting. Therefore, if an income has not accrued, the same cannot be taxed even though the assessee is following mercantile system of accounting. From the perusal of the orders, it appears that the assessee have not received the CCS amount only because of non-realisation of sale proceeds or submission of proof thereof, hence, prima facie the assessee's claim appears to have been accepted b....
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....ockist to A track their necessities and follow up with such authorities which resulted into placement of orders directly to the assessee-company. However, the assessing officer for the reasons mentioned in the earlier years, disallowed the claim of the assessee. The learned Commissioner (Appeals) also confirmed the same. 38. The learned counsel took us to the voluminous documentary evidences filed in the form of paper book to substantiate its claim. It was also contended that these parties also claimed Modvat on direct purchases. It was also contended that sales was made in this year, hence, liability to pay commission was also incurred in this year. Besides making these pleadings, the learned counsel reiterated the submissions made in assessment year 1986-87. 39. The learned D.R., on the other hand, put strong reliance on the orders of revenue Authorities. 40. We have dealt with the issues in detail and also covered all the aspects while deciding assessee's appeal in ITA No. 5141 /Bom./1994 hereinbefore, hence, there is no need to repeat the same reasonings; here again. We would like to add that in this year the assessee has furnished additional documentary evidences ....
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....6. The facts, in brief, are that the assessee revised its claim for deduction under Sections 80HH and 80-I of the Act during the course of assessment proceedings subsequent to filing of revised return. However, the Assessing Officer did not take cognisance of these claims made by the assessee. The learned Commissioner (Appeals) also confirmed the action of assessing officer. 47. The learned counsel narrated the factual matrix of the case and contended that the learned Commissioner (Appeals) ought to have accepted the claims of the assessee. 47A. At this stage, the learned D.R. pointed out that the assessee filed revised return before the assessing officer wherein this claim was not revised, hence, the assessee missed the opportunity as provided in the law and for its fault he could not get the benefits which were against the provisions of law. The learned D.R. further contended that this issue was covered against the assessee by the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT. 48. The learned counsel for the assessee in the rejoinder, contended that the ratio of that decision was applicable to the assessment proceedings and the learn....
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....partment should adopt in dealing with assessees in matters affecting their interest and convenience. It appears that these instructions are not being uniformly followed. 2. Complaints are still being received that while Income Tax Officers are prompt in making assessments likely to result into demands and in effecting their recovery, they are lethargic and indifferent in granting refunds and giving reliefs due to assessees under the Act. Dilatoriness or indifference in dealing with refund claims (either under Section 48 or due to appellate, revisional, etc. orders) must be completely avoided so that the public may feel that the Government are actually prompt and careful in the matter of collecting taxes and granting refunds and giving reliefs. 3. Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude....
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..... (g) Section 60(2) : Cases where relief can properly be given under this sub-section should be reported to the Board. In this Circular, the Board has recognised the fact that responsibility for claiming refunds and reliefs rests with the assessee. AS IMPOSED BY LAW even then the Board has directed the officers to draw the attention of the assessees in respect of any refunds or reliefs to which they are eligible, which they have not claimed for some reason or the other. The Board has also given few examples in this regard and has specifically clarified that, these examples are not exhaustive. Further, the Board also issued Circular F. No. 81/27/65-IT(B), dated 18th May, 1965 defining the duties of P.R.Os. in providing assistance to the public . In this circular, the Board has also advised the P.R.O. to visit the Government/commercial establishments to provide them assistance in filing correct returns and making eligible claims. These Circulars issued by the Board almost 4-5 decades before cast a duty on the assessing authorities to collect only the legitimate tax. Starting from late 1980s, the Government has focussed as voluntary compliance by the assessees and, t....
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....dy issued would not become irrelevant or can be ignored. Admittedly, the circular issued in 1995 has not been withdrawn, hence, it has got binding force on the subordinate authorities even as on date. Accordingly, we hold that the assessing officer is bound to assess the correct income and for this purpose, the assessing officer may grant reliefs/refunds suo motu or can do so on being pointed out by the assessee in the course of assessment proceedings for which assessee has not filed revised return, although, as per law, the assessee is required to file the revised return. Having stated so, in our view, the learned Commissioner (Appeals), having co-terminus powers with the powers of assessing officer and the fact that appellate proceedings are the continuation of original proceedings, should have entertained the claim of assessee and allowed if other conditions of the provisions of the law were satisfied. In this view of the matter, we accept both the grounds of the assessee and direct the learned Commissioner (Appeals) to consider the claim of the assessee at the revised figures on merits and decide the same according to the provisions of Sections 80HH and 80-I of the Act after he....
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....y your appellants forms part of the total turnover for the purpose of calculating deduction under Section 80HHC. 1.2 The Commissioner (Appeals) ought to have accepted your appellants submissions that excise duty and sales tax collected by your appellants do not and cannot for part of the total turnover for the purpose of calculating deduction A under Section 80HHC of the Act. He has thereby failed to appreciate that the taxes collected by your appellants are only in the capacity of agents and that, it does not and cannot for part of your appellants total turnover. Similarly conversion charges and income from sale of scrap do not form part of total turnover for the purposes of deduction under Section 80HHC of the Act. 1.3. The Commissioner (Appeals) has failed to appreciate that since no excise duty sales-tax element, conversion charges and income from sale of scrap was included in exports and therefore, while comparing the total turnover to export turnover for the purpose of computation of export profits, the two turnovers should be comparable with each other. 2.1 The Commissioner (Appeals) has erred in law and on facts in confirming the addition made in ....
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....dering the ground of appeal of your appellant in respect of non-consideration by the assessing officer of the export proceeds billed and received in Indian Rupees from foreign customers for the purpose of forming part of the Export turnover for calculating deduction under Section 80HHC of the Act. 3. The learned Commissioner (Appeals) has erred in law and on facts in upholding the disallowance by the assessing officer in respect of export commission of Rs. 1,81,228. 4. The learned Commissioner (Appeals) has erred in law and on facts in not considering the ground of appeal of your appellant in respect of non-allowance by the assessing officer in respect of deduction under Section 35D of Rs. 61,500 towards debenture issue expenses. 64. Ground No. 1 is identical to ground No. 1.1 in ITA No. 7280/B/95 for assessment year 1986-87 which we have decided in favour of assessee, hence this ground also decided accordingly. 65. Ground Nos. 2 & 4 are not pressed, hence, dismissed as not pressed. 66. In respect of Ground No. 3, the facts, in brief, are that a disallowance of Rs. 13,42,438 was made in assessment year 1991-92 on account of commission payable to Project &....
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....ding the decision of DC in disallowing deduction amounting to Rs. 1,23,213 on pro rata basis being 1/7th of the amount of premium payable on maturity of debenture in future years claimed during the previous year. 3.1 The learned Commissioner (Appeals) has erred in law and on facts in confirming the decision of the DC in disallowing the deduction amounting to Rs. 1,82,494 out of provision made for warranty claims. The Commissioner (Appeals) thereby erred in rejecting your appellants contention that the provision made in the accounts for the liability on account of warranty claims is an admissible deduction. 4.1 The Commissioner (Appeals) has erred in law and on facts in upholding the decision of the DC that excise duty and sales-tax paid by your appellants forms part of the Total turnover for the purpose of calculating deduction under Section 80HHC and thereby adding a sum of Rs. 98,74,34,390 to the total turnover of your appellants. 4.2 He failed to appreciate that excise duty and sales tax collected by your appellants cannot form part of total turnover as the taxes are collected by your appellants only in their capacity as agents. 5.1 The Commis....