TaxTMI 
TaxTMI 
2007 (3) TMI 409
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....bad 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 submit the details that can prove the manner in which the agents have booked....
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.... 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 these entities was also received, however, in the meanwhile, the ld. Commissioner (Appeals) had set aside this issue to assessi....
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....er (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 of accounts adopted by the assessee, criteria for fixing rate of commission and internal correspondences regarding the nature of....
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....egment 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 the assessee in these locations through such parties directly or indirectly have been accepted as genuine. The assessee has establish....
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....n 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 that mens rea is proved insofar as the purpose of claiming bogus expenses is concerned and in thereby confirming the order passed by the assessing officer le....
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.... 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 appellants had not been able to produce any evidence as proof for the services rendered by the business agents. 3.3 The Commissioner (Appeals) has erred in law and on facts in holding that your appellants have failed to submit the details that can prove the ma....
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....n 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 arbitrary suo motu basis. 1.5 The Commissioner (Appeals) has erred in law and on facts in illegitimately stretching and unduly expanding the scope of the penal sections via the imaginative order imposed by the DC, of being more concerned with the colour, the content, the context of the statute rather than with its literal importance and the circ....
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....he 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 facts in holding the contention of the DC that the CCS claim of your appellants is still alive and that if rejected, then the same shall be considered in the year, in which the claim is rejected. 4.2 The Commissioner (Appeals) ought to have accepted your appellants submissions and considered the evidence furnished by your appellants that the CCS claim of Rs. 21,44,937 was rejected by the authorities concerned already and thereby the....
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....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 of claims lodged by customers and on the basis of report of Service Engineers. However, actual claims were settled at Rs. 6,22,007, hence, the assessing officer disallowed Rs. 27,032 being the difference between the two. The learned Commissioner (Appeals) also confirmed the same. 28. The learned counsel for the assessee contended that provision was made for claims lodged by the customers and registered by the assessee on the basis of Service Engineer's report, hence, the liability to pay had crystallised ....
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....ersion 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 profit. In our considered opinion, the assessee should get deduction the basis of assessed income as the basis for the levy of tax has to be arrived at after taking into consideration the deductions under Chapter VI-A and the total income can be computed correctly only after giving deduction on income as computed by the assessing officer after making various disallowances. Accordingly, we direct the assessing officer to grant the deduction under Section 80HHC to assessee on the assessed income as determined by the asse....
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....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 by the concerned authorities. Having stated so, however, the factum is that none of the revenue authorities have examined the terms and conditions of the scheme so as to determine the aspect of accrual and time thereof. It is also not clear from the records whether it is only quantification which is pending or certain other conditions are to be complied before actual disbursement of the same by the concerned authority although the assessee's right to receive the CCS have accrued and it is a legally enforceable right. This ap....
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..... 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 which further support the claim of the assessee. Accordingly, ground No. 5 stands accepted. 41. In respect of Ground No. 6, the facts, in brief, are that the assessing officer made disallowances of Rs. 3,35,507 under Section 37(2A) of the Act. In the appellate proceedings, the assessee contended that Rs. 62,601 had been incurred on employees accompanying guests, Rs. 13,299 were incurred on stay expenses and Rs. 53,866 were incurred for sales conference of Managers at Hotel Oberoi. In the appellate proceedings before the learned Commis....
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.... 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 learned Commissioner (Appeals) have taken cognizance of the claims made by the assessee which was very much within the powers of the Commissioner (Appeals). 49. The assessee claimed deduction in the original return of income. Though the assessee revised its original return, however, claim under Sections 80HH and 80-I was not revised. Subsequently, during the course of assessment proceedings, the assessee revised its claim, which the assessing officer did not take into cognisance as the assessee had not filed revised return to this effect. The learned Commis....
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....ders) 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 would, in the long run, benefit the department for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should: (a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for cl....
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....1/27/65-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, therefore, Government has reduced the number cases selected for compulsory scrutiny and has also reduced the tax rates. This policy of the Government has resulted into higher tax revenues and simplification of laws. It is a settled position that the Circulars issued by the Board are binding on the subordinate income-tax authorities and if C.B.D.T. issues directions which are beneficial to the assessees although the same may not be directly in consonance with the provisions of law, even then these instructions have to be given effect and adhered to by the concerned authorities. Thus, there is a strong case for reciprocity to be shown by the revenue Authorities....
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....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 hearing the assessee. Thus, this ground of the assessee stands accepted. 50. Ground No. 9.1 - The facts relating to ground No. 9.1 are that the assessee wrote back a provision of Rs. 2,07,855 which was not required anymore, however, the assessee contended that this was not chargeable to tax as the provisions so made was not allowed as a deduction in the year in which such provision was made. The assessing officer rejected the claim of the assessee and the learned Commissioner (Appeals) dismissed the ground by holding that no adjustment was made in the assessment order by the assessing officer by increasing the total income by this disallowance hence, this gro....
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....duction 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 the sum of Rs. 19,82,293 by the JC out of total amount of third party commission paid to various business agents in consideration of the services rendered by them in spite of the voluminous evidence produced to prove the genuineness of the services rendered. Your appellants had fully discharged the onus regarding bona fide of commission expenses incurred during the course of business. 2.2 The Commissioner (Appeals) has also failed to take cognizance of the fact that your appellants had, during the course of the proceeding, before the JC, furnished voluminous information, setting out the realities of the trade. 3.1 On the facts and in law, the Commissioner (Appeals) erred in remanding the matter ba....
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....round 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 & Equipment Corporation of India on export made through it because the commission had not become payable as the sale proceeds had not realised. Out of this, Rs. 11,61,210 was allowed in this year as it became payable on receipt of sale proceeds. However, the balance sum of Rs. 1,81,228 was not allowed as sale proceeds were not realised. The learned Commissioner (Appeals) also confirmed the action of Assessing Officer following the appellate order for assessment year 1990-91. Still aggrieved, the assessee is in appeal before us. 67. The learned counsel appearing on behalf of the assessee reiterated the submissions made before the revenue authorities. 68. The learned D.R. placed strong reliance on the order of assessing officer. 69. Admittedly, this issue is o....
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....over 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 Commissioner (Appeals) has erred in law and on facts in not deleting the addition made in the sum of Rs. 24,13,096 by the DC on account of the Third Party Commission paid to various business agents in consideration of the services rendered by them in spite of the voluminous evidence produced to prove the genuineness of the services rendered. Your appellants had fully discharged the onus regarding bona fide of commission expenses incurred during the course of business. 5.2 The Commissioner (Appeals) has also failed to take cognizance of the facts that your appellants had, during the course of the proceeding, before the DC, furnished voluminous information, setting out the realities of the trade. 5.3 The Commissioner (Appeals) has erred in law and on facts in upholding the order of the DC that commission agents did not....