AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (12) TMI 173
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....s grossly erred in confirming part of addition of expenditure incurred on commission of Rs. 1,38,262/- on facilitation of sales as per detail given as below on criteria that the amount involved in payment to the below mentioned parties was not on the basis of agreements executed on prescribed stamp paper for payment of commission either in current or earlier years ignoring the nexus of payment. S. No. PAN Name of person Amount of commission 1 AADHR9000C Garg Steel corp. 74,947 2. AAFPG1404K Sanjay Goyal 2,439 3. AIFPK7469L Sushil Kumar Agarwal 24,166 4. AHNPB8961D Vipul Biyani 35,587 Misc. commission 1,123 Total 1,38,262 3. Without prejudice to the ground No. 2, the learned Commissioner of Income Tax (A) has grossly erred in confirming the action of the Assessing Officer for making addition U/s 153A of the Act without appreciating the fact that no incriminating material or documents were found during the course of search action U/s 132 of the Act, which warranted addition. 4. That the learned Commissioner of Income Tax (A) has grossly erred in confirming part disallowance of commission ignoring the fact that no disallowance ....
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....ssioner of Income Tax (A), Central, Jaipur with respect to confirming part of the addition made by the Assessing Officer and dismissing the additional ground raised by the appellant regarding that no addition is warranted U/s 153A is bad in law and facts of the case to that extent. 2. That the learned Commissioner of Income Tax (A) has grossly erred in confirming part of addition of expenditure incurred on commission of Rs. 82,552/- on facilitation of sales as per detail given as below on criteria that the amount involved in payment to the below mentioned parties was not on the basis of agreements executed on prescribed stamp paper for payment of commission either in current or earlier years ignoring the nexus of payment. S. No. PAN Name of person Amount of commission 1 AABFR8071R R.K. Brothers 897 2. AAACR8108F Rahul Alloys (P) Ltd. 15,482 3. AAFCS2939G Sanjay Iron & Steel Ltd. 1,086 4. AGZPG6400D Shashi Bala Goyal 50,689 5. ACIPG5343C Vardhman Iron Store 14,398 Total 82,552 3. Without prejudice to the ground No. 2, the learned Commissioner of Income Tax (A) has grossly erred in confirming the action of the Assessing Office....
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.... of ITA No. 666/JP/2012 (A.Y. 2007-08) "1. That the order of the learned Commissioner of Income Tax (A), Central, Jaipur with respect to confirming part of the addition made by the Assessing Officer and dismissing the additional ground raised by the appellant regarding that no addition is warranted U/s 153A is bad in law and facts of the case to that extent. 2. That the learned Commissioner of Income Tax (A) has grossly erred in confirming part of addition of expenditure incurred on commission of Rs. 24,22,074/- on facilitation of sales as per detail given as below on criteria that the amount involved in payment to the below mentioned parties was not on the basis of agreements executed on prescribed stamp paper for payment of commission either in current or earlier years ignoring the nexus of payment. S. No. PAN Name of person Amount of commission 1 AAEHA3305C Abhinav Agarwal (HUF) 230,152 2. AANPG6554A Anand Goel 5,620 3. AACPD4106G Ashok Dang 125,577 4. AAAHD8559D Belco Ispat & Aloys 6,790 5. AEEPA4747G Deepak Kumar Agarwal 60,824 6. AACCS1989H Gaurang Steel (P) Ltd. 251,867 7. AABFI2812F Ishan Enterprises 50,815 8. ABIP....
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....d. S. No. PAN Name of party Amount of commission 1 AAEHA3305C Abhinav Agarwal (HUF) 226.410 2. ACAPB9144Q Gagan Bansal 150,740 3. AADHR9000C Garg Steel Corporation 446,358 4. ABAPA4427A Ghanshyam Agarwal 201,577 5. ABCPK1191R Krishan Kumar 150,780 6. AABFN4078Q Naresh Chand Jain (HUF) 720,716 7. AAEHP6875L Puneet Jain & Sons (HUF) 708,218 8. AAFHR7717G Ratan Lal (HUF) 141,370 9. AIFPK7469L Sushil Agarwal 202,538 10. AASPK3157C Umesh Kumar 66,071 11. AAQPB5647J Vivek Kumar 151,761 Total 3,166,539 3. That the learned Commissioner of Income Tax (A) has grossly erred in confirming part of addition of expenditure incurred on commission of Rs. 12,75,841/- on facilitation of sales as per detail given as below on criteria that the amount involved in payment to the below mentioned parties was not on the basis of agreements executed on prescribed stamp paper for payment of commission either in current or earlier years ignoring the nexus of payment. S. No. PAN Name of party Amount of commission 1 AHOPB3963A Arun Prakash Biyani 81,341 2. AACCS1989H Gaurang Steel (P) Ltd. 62,810 3. ....
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....d CTD bars from the appellant company in earlier years and some of the parties have no formal agreement with the appellant company on stamp paper or on letter head. 3. That the learned Commissioner of Income Tax (A) has grossly erred in confirming part of addition of expenditure incurred on commission of Rs. 3,87,451/- on facilitation of sales as per detail given as below on criteria that the amount involved in payment to the below mentioned parties was not on the basis of agreements executed on prescribed stamp paper for payment of commission either in current or earlier years ignoring the nexus of payment. S. No. PAN Name of party Amount of commission 1 AEIPG1583L Sh. Amit Goel 70,468 2. AHOPB3963A Arun Prakash Biyani 19,246 3. AALPJ5951G Global Marketing Co. 106,192 4. AAHPG6724G Hari Niwas 12,853 5. AAWPD4583D Salasar Plywood 22,941 6. AGNPA2451N Shri Balaji trading Co. 1,52,455 7. Mahaveer 3,296 Total 3,87,451 4. Without prejudice to the ground No. 2 and 4, the learned Commissioner of Income Tax (A) has grossly erred in confirming the action of the Assessing Officer for making addition U/s 153A of the Act wi....
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....in A.Y. 2006-07, Rs. 44,69,998/- in A.Y. 2007-08, Rs. 1,01,59,019/- in A.Y. 2008-09 and Rs. 1,67,08,226/- in A.Y. 2009-10. The learned Assessing Officer gave reasonable opportunity of being on commission payment, which was replied by the assessee vide letter dated 06/12/2010 in all the assessment years. It was submitted as under:- A.Y. 2003-04 "Commission on sales amounting to Rs. 11,08,486/- had been reflected in schedule 19 of the Balance Sheet as at 31/3/2003. Out of which, commission amount of Rs. 6,57,406/- was related to sales made from Bhiwadi unit and rest of the commission was paid on sales made from branch offices of the company. Kindly note that we used to settle commission account annually, hence, accounted for commission on sales at the yearend only and made payment in the next financial year. In some cases, were distributors requested us to release the payment within the financial year, we normally accept the request and made the payment of commission to them." Notices U/s 133(6) of the Act were also issued to the brokers who have received commission from the assessee company, namely Sh. Subhash Chand, Sh. Vipul Viyani, Sh. Vikrant Mahajan, Sh. Sushil Kumar A....
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....ipul Viyani, Sh. Vikrant Mahajan, Sh. Dharampal Khera, Sh. Chandr Sekhar Goyal to provide details and documents. A.Y. 2005-06 "Notices U/s 133(6) of the Act were also issued to the brokers namely Ms. Kanta Modi, Sh. Chander Shekhar Goyal, Sh. Jagdish Manchandda, Sh. Maman Chand Goyal, Sh. Shard Manchandda, M/s Asham Settel, Sh. Vikrant Mahajan, M/s Project Consultant, Sh. Anil Kumar Mahajan, Sh. Narendra Goyal, Sh. Naresh Garg to provide details and documents. A.Y. 2006-07 "Notices U/s 133(6) of the Act were also issued to the brokers namely Sh. Amit Goel, Sh. Naresh Garg, Sh. Gulshan Gupta, Sh. Anil Sharda, Sh. Anil Kumar, Sh. Annand Goel, M/s Sangam traders, Ms Rajni Gupta, Sh. Vijay Arora, Sh. Sumit Goel, Sh. Vikrant Mahajan, Sh. Sharad Manchanda, Sh. Jagdish Manchanda, Sh. Maman Chand Goel, Ms Sashi Bala Garg, M/s Anuj Global Corporation, M/s Rajeev Garg (HUF) to provide details and documents. A.Y. 2007-08 "Notices U/s 133(6) of the Act were also issued to the brokers namely M/s Anubhav Agarwal (HUF), Sh. Sumit Goel, Smt. Rajni Gupta, M/s Ishan Enterprises, Sh. Deepak Kumar Agarwal, M/s Ajay Traders, Sh. Amit Goel, Sh. Annand Goel, Sh. Anil Kumar, Sh. Ashok Da....
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....Ashok Kumar Dang, M/s Panna Lal Kundal Lal, Sh. Maman Chand Gaoyl, Sh. Naresh Garg, Kastur Chand Jain, Sh. Narender Goyal, Sh. Chander Sekhar Goyal replied. For A.Y. 2005-06 out of 11 so claimed brokers mentioned above only sh. Anil Kumar Mahajan, Sh. Vikrant Mahajan, Sh. Maman Chand Goyal, Sh. Naresh Garg, Sh. Narender Goyal, Sh. Chander Shekhar Goyal, Sh. Sharad Manchandda replied. For A.Y. 2006-07 out of 17 so claimed brokers mentioned above only sh. Anil Kumar Mahajan, Sh. Vikrant Mahajan, Ms. Rajni Gupta, Ms. Shashi Bala Garg, Sh. Naresh Kumar Garg, Sh. Maman Chand Goyal, Sh. Sumit Goel replied. For A.Y. 2007-08 out of 25 so claimed brokers mentioned above only sh. Deepak Kumar Agarwal, Sh. Sanjeev Kumar Dang, Sh. Vikrant Mahajan, Sh. Anil Kumar Mahajan, M/s Ishan Enterprises, M/s Trepi Consultants Pvt. Ltd., Sh. Sanjeev Kumar Gupta, Sh. Sumit Goel, Sh. Ashok Dang, M/s Ratan Lal (HUF), Sh. Naresh Garg, Sh. Maman Chand Goyal, M/s Ajay Traders, Sh. Pankaj garg replied. For A.Y. 2008-09 out of 40 so claimed brokers mentioned above only sh. Sanjay Kumar Gupta (Distributor, Comm Rs. 2,50,116), Sh. Sarthak Gupta (Distributor, no agreement, Comm. Rs. 2,25,300/-), M/s Isha....
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....r: "If these so claimed brokers, had done any dealing over telephone with so claimed customers, they could have easily got complete postal addresses of the parties over telephone or by persons visit even after the notice U/s 133(6) has been issued to them, if it was not readily available and would have passed on the same to the undersigned. In view of inability of these so claimed brokers to prove the addresses and telephone numbers of the customers for sale, I consider that the reason for not supplying addresses and telephone numbers of these parties is that they do not know them and have not done any transaction with them. Had they know them and had done some transaction with them, they could have easily provided the desired information. Further, in almost all the cases to whom such commission payments have been made by the assessee company, it is observed that the respective accounts of the brokers have been credited by the brokerage amount on the last day of the accounting year and they payments have been made in the next year. In addition, the bills raised by all these said brokers mostly have been raised on the last day of the accounting year or in the last month of the....
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....ut neither addresses nor telephone numbers were provided. This information should have been with these so claimed brokers if they really had done some dealing with such parties because for many of them commission income from the assessee is the only source of income or major source of income as has been revealed from the details of income filed by them. These brokers were also asked to file copies of booking forms received from the customers from whom sales were arranged by them and copies of booking forms submitted by them to M/s Kamdhenu Ispat Ltd. for arranging the sales on which commission has been earned. To this query most of them have stated that the business has been conducted over telephone or by personal visit and they do not follow the system of booking forms, or chose to remain silent. If these so claimed brokers, had done any dealing over telephone with so claimed customers they could have easily got complete postal addresses of the parties over telephone or by personal visit even after the notice U/s 133(6) has been issued to them, if it was not readily available and would have passed on the same to the undersigned. In view of inability of these so claimed brokers to ....
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....uding TMT bars and is paying royalty to the assessee company, would arrange customers for M/s Kamdhenu Ispat Ltd. when they themselves have "Kamdhenu" brand of material manufactured by their company, M/s Ashiana Ispat Ltd. to sell. Similarly, it has been noted that in some cases like Sh. Vikram Mahajan, Sh. Anil Kumar Mahajan, Sh. Vikrant Mahajan that whole family has been engaged by the assessee company to arrange customers for it although none of them known the address of the customer claimed to be arranged by them for the assessee company. Whole gamut of raising bill for commission at the fag end of the year and receiving cheques from the assessee company for commission in the next year, is a make believe arrangement between the assessee company and these so claimed brokers to siphon off the profit to evade tax. The bills are raised at the fag end of the year after calculating the adjustment to be made in the P&L account to reduce the profit. All the above facts put together prove that no services have been provided by these so claimed brokers to the assessee company to earn commission. He also relied on the following case laws:- (i) Niemla textiles Finishing Mills Pvt. Lt....
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....f raw material with their complete addresses and telephone numbers and name and addresses and telephone numbers of parties from whom raw material has been purchased. The learned Assessing Officer observed that: "However, the assessee did not reply on the stipulated date. After reminding several times over telephone and verbally, details were filed on 06/12/2010. On going through the details it has been found that the assessee has paid commission of Rs. 4,18,95,182/- during the year on purchase of raw material. However, it has been noticed from the details filed that the assessee has not filed information sought in para 2 of the notice i.e. name and addresses and telephone numbers of parties from who raw material has been purchased. This information was crucial as it was required to make enquiries from these parties whether they have made sale of raw material i.e. ingots etc. to the assessee company directly or through any broker. Similarly, the assessee has not furnished the telephone numbers of the brokers, which also is a deliberate act, so that instant enquiry is not possible. It is surprising that the assessee does not have the telephone numbers of the brokers whom it has be....
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....g bill for commission at the fag end of the year and receiving cheques from the assessee company for commission in the next year is a make believe arrangement between the assessee company and these so claimed brokers to siphon off the profit from taxation. The bills are raised at the fag end of the year after calculating the adjustment to be made in the P&L account to reduce the profit. On the issue of commission on purchases also, in rely upon the decisions as has been mentioned in issue about the commission on sale in para above. In view of the facts of the case regarding paying of commission to the so claimed brokers as discussed above, it is held that no services have been provided by the so claimed brokers to warrant any commission. As such the amount of commission of Rs. 4,18,95,182 claimed to be paid by the assessee company is not proved to be expended for the purpose of the business of the assessee company. Therefore, the claim of commission amounting to Rs. 4,18,95,182/- is disallowed, not being wholly and exclusively for the purpose of the business of the assessee company an addition of Rs. 4,18,95,182/- is made to the income of the assessee." The same findings had ....
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....d not non-genuine namely Sh. Maman Chand Goyal, Naresh Kumar Garg, Vikrant Mahajan and M/s Ajay traders and commission paid to them was totaling to Rs. 4,32,914/-. Accordingly, addition to the extent of Rs. 10,87,580/- (654666+432914) had been deleted by the learned CIT(A) and balance addition of Rs. 9,70,314/- had been confirmed in A.Y. 2004-05 under the head commission on sale. 3.2 In A.Y. 2005-06, 10 brokers had duly executed agreement on stamp paper and commission amount paid on sale at Rs. 19,19,086/-. Apart from the above 10 brokers mentioned by the learned CIT(A) at page 5 of his order, there were two brokers out of the list of 10 brokers, who had been treated non non-genuine namely Sh. Anil Kumar and Sh. Naresh Kumar Garg and commission paid to them was totaing to Rs. 1,85,336/-. Accordingly addition to the extent of Rs. 21,04,422/- (1919086+185363) was deleted and balance addition of Rs. 82,552/- was confirmed by the learned CIT(A). 3.3 In A.Y. 2006-07, 8 brokers had executed agreement on stamp paper and commission paid to them was Rs. 14,16,949/- as mentioned by the learned CIT(A) at page 6 of his order. Apart from the above, there were three brokers out of list of ....
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....3-04, 08-09, 09- 10 4. AAXPK9526O Dharmpal Khera 55729 (SP) 125142 (SP) - - 111,549 101736 (SP) 94768 (SP) A.Y. 03-04, 04-05, 08- 09, 09-10 5. ABJPA7704M Garg Steel - - - - 350,883 461260 (SP) 360193 (SP) A.Y. 08-09, 09-10 6. AAOPG2435P Maman Chand Goyal 50057 (SP) 110,386 86004 (SP) 100,507 150,966 150896 (SP) 257678 (SP) A.Y. 03-04, 05-06, 08- 09, 09-10 7. AAHPG2008D Sanjay Gupta 63027 (SP) - - 200,184 150,006 250116 (SP) 201079 (SP) A.Y. 03-04, 08-09, 09- 10 8. ABJTM4381N Anil Kumar - - 129,004 100567 (SP) 250196 (SP) 200256 (SP) - A.Y. 06-07, 07-08, 08- 09 9. AHNPM4153C Vikrant Mahajan 50,172 125,031 100317 (SP) 50388 (SP) 225,849 200498 (SP) 205636 (SP) A.Y. 05-06, 06-07, 08- 09, 09-10 10. AEUPG4303A Naresh Kumar Garg 63077 (SP) 130,142 56,332 100453 (SP) 150450 (SP) 150158 (SP) 129295 (SP) A.Y. 03-04, 06-07 to 10 Total 61,915 432,914 185,336 376,029 1,286,1 50 458,894 180,545 Accordingly, addition of Rs. 20,47,924/- (Rs. 761774+1286150) was deleted and balance addition of Rs. 24,22,074/- was confirmed in A.Y. 2007-08 in respect of commission on sale. 3.5 In A.Y. 2008-09, the learned CIT(A) observed that out of to....
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.... learned CIT(A) has reproduced on pages 49 and 50, the main object of M/s SKT as per memorandum of article of association, it has been emphasized by the learned CIT(A) that primarily SKT was engaged in activities in various kinds of papers and no where mentioned that it deals M.S. Ingots/Billets. Even in ancillary or incident objects, M/s SKT was not found in the business of supply of M.S. Ingots for which commission had been paid to it. Further it has been also found by him that commission bill was issued by the M/s SKT on 31/3/2008 i.e. last day of financial year with bill No. 1, which is not possible. He also found mistake in calculation of commission, but which was not so significant. Accordingly, the commission paid on purchase shown to be made to M/s SKT amounting to Rs. 35,13,323/- was confirmed by the learned CIT(A). The remaining commission paid to 11 parties to whom commission on purchase claimed at Rs. 31,66,539/-, he found that these parties were appearing in the list of commission paid on sale of TMT and CTD bars in other years. These parties can be said to be in contact with the local dealers to whom they can arrange sale of CTD and TMT bars but no evidence has been f....
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....on on purchases in A.Y. 2008-09. In case of 5 parties, there is neither any agreement on stamp paper nor even on the letter head. Accordingly, the disallowance of commission on purchase so made by the Assessing Officer in A.Y. 2009-10 in respect of all parties except M/s Shri Ram Metalloys Pvt. Ltd. has been confirmed amounting to Rs. 29,65,592/- and addition of Rs. 6,08,129/- deleted i.e. commission paid on purchase to M/s Shri Ram Metalloys Pvt. Ltd.. 4. Now the assessee is in appeals before us. 5. The learned A.R. for the assessee submitted that the parties to whom commission have been paid have either confirmed directly to the department in response to notices U/s 133(6) or the appellant has filed confirmation from the parties concerned, for which he filed detailed paper book for all the years under the head confirmation filed before the Assessing Officer directly and confirmation filed by the appellant before the learned CIT(A). The assessee has given names, addresses, PAN numbers, copy of confirmation alongwith copy of account in some cases, copy of agreement and copy of bank account of recipients. The learned CIT(A) disallowed the claim of commission primarily for the ....
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....ks of account maintained by the assessee. It is settled principles of law that no addition/disallowance can be made on suspicion, surmises and conjectures as held by the Hon'ble Supreme Court in following cases:- (i) Dhirajlal Girdharilal Vs. CIT 26 ITR 736. (ii) Omar Salay Mohammed Sait Vs. CIT 37 ITR 151. (iii) Dhakeshwari Cotton Mills Ltd. Vs. CIT 26 ITR 775. (iv) Lalchand Bhagat Ambica Ram Vs. CIT 37 ITR 288. Therefore, he prayed to allow the appeal of the assessee in all the years. 6. At the outset, the learned D.R. vehemently supported the order of lower authorities. 7. We have heard the rival contentions of both the parties and perused the material on record. The assessee has filed confirmations either before the Assessing Officer Assessing Officer or before the CIT(A). The learned CIT(A) had called remand report on additional evidence furnished before him where Assessing Officer has accepted the commission paid either on sale or purchase as genuine. However, learned CIT(A) has not accepted the remand report submitted by the Assessing Officer and deviated from the findings of the Assessing Officer during the appellate proceedings by giving reasons fo....