TaxTMI 
TaxTMI 
2015 (1) TMI 98
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....14 (A.Y. 2003-04)(Assessee) "1. That the order of learned Commissioner of Income-tax (Appeals) is bad in law and on facts of the case. 2. That the learned Commissioner of Income-tax (Appeals) has erred in sustaining the addition to the extent of Rs. 5,98,323/- out of disallowance of Rs. 10,61,432/- made under section 37(1) of the Income Tax Act, 1961 by Assessing Officer in the assessment order on account of commission paid to sales by the assessee. 3. That the learned Commissioner of Income-tax (Appeals) has erred in sustaining the disallowance without appreciating the fact that the disallowance was made without allowing an opportunity of confronting the material gathered at the back of the assessee. 4. That the learned Commissioner of Income-tax (Appeals) has erred in sustaining the additions on account of disallowance made in the account of commission paid on sales by the assessee in proceedings under section 153A without there being any material found in the course of search from the premises of the assessee and its directors contrary to the claim made by the assessee. 5. That the learned Commissioner of Income-tax (Appeals) has erred in stating in order that the A.R. of ap....
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....aimed on sale even though the assessee could not prove the genuineness of the expenses claimed as such these expenses did not fulfill the conditions laid down in Sec. 37(1) as they were not wholly and exclusively for the purpose of the business. 2. The appellant craves the right to amend alter or add to any of the grounds of appeal given above. Grounds of ITA No. 473/JP/2012 (A.Y. 2005-06) (Assessee) "1. That the order of learned Commissioner of Income-tax (Appeals) is bad in law and on facts of the case. 2. That the learned Commissioner of Income-tax (Appeals) has erred in sustaining the addition to the extent of Rs. 16,27,750/- out of disallowance of Rs. 22,09,955/- made under section 37(1) of the Income Tax Act, 1961 by Assessing Officer in the assessment order on account of commission paid on sales by the assessee. 3. That the learned Commissioner of Income-tax (Appeals) has erred in sustaining the addition of Rs. 29,13,655/- made under section 37(1) of the Income Tax Act, 1961 by Assessing Officer in the assessment order on account of commission paid on purchases made by the assessee. 4. That the learned Commissioner of Income-tax (Appeals) has erred in sustaining the di....
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....d on purchases made by the assessee. 4. That the learned Commissioner of Income-tax (Appeals) has erred in sustaining the disallowance without appreciating the fact that the disallowance was made without allowing an opportunity of confronting the material gathered at the back of the assessee. 5. That the learned Commissioner of Income-tax (Appeals) has erred in sustaining the additions on account of disallowance made in the account of commission paid on sales and commission paid on purchases by the assessee in proceedings under section 153A without there being any material found in the course of search from the premises of the assessee and its directors contrary to the claim made by the assessee. 6. The above grounds of appeal are without prejudice to each other. 7. That the appellant craves leave to add, alter amend and/or modify the above grounds of appeal. Grounds of Revenue's cross appeal i.e. I.T.A. 603/JP/2012 (A.Y. 2006-07) "1(i) Whether on the facts and circumstances of the case, the CIT(A)(Central), Jaipur has erred in law and on facts in deleting the disallowance of Rs. 9,53,760/- out of the total disallowance of Rs. 33,34,321/- made by the A.O. in respect of the co....
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.... Jaipur has erred in law and on facts in deleting the disallowance of Rs. 36,16,923/- out of the total disallowance of Rs. 1,11,65,917/- made by the A.O. in respect of the commission expenses claimed on sale. 1(ii) Whether on the facts and circumstances of the case, the CIT(A) (Central), Jaipur has erred in law and on facts in deleting the part of the disallowance made by the A.O. in respect of the commission expenses claimed on sale even though the assessee could not prove the genuineness of the expenses claimed as such these expenses did not fulfill the conditions laid down in Sec. 37(1) as they were not wholly and exclusively for the purpose of the business. 2(i) Whether on the facts and circumstances of the case, the learned CIT(A)(Central), Jaipur has erred in law and on facts in deleting the disallowance of Rs. 1,14,23,789/- out of the total disallowance of Rs. 3,35,85,302/- made by the A.O. in respect of the commission expenses claimed on purchases. 2(ii) Whether on the facts and circumstances of the case, the learned CIT(A) (Central), Jaipur has erred in law and on facts in deleting the part of the disallowance made by the A.O. in respect of the commission expenses claim....
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....nces of the case, the CIT(A) (Central), Jaipur has erred in law and on facts in deleting the part of the disallowance made by the A.O. in respect of the commission expenses claimed on sale even though the assessee could not prove the genuineness of the expenses claimed as such these expenses did not fulfill the conditions laid down in Sec. 37(1) as they were not wholly and exclusively for the purpose of the business. 2(i) Whether on the facts and circumstances of the case, the learned CIT(A)(Central), Jaipur has erred in law and on facts in deleting the disallowance of Rs. 2,01,45,742/- out of the total disallowance of Rs. 6,02,47,957/- made by the A.O. in respect of the commission expenses claimed on purchases. 2(ii) Whether on the facts and circumstances of the case, the learned CIT(A) (Central), Jaipur has erred in law and on facts in deleting the part of the disallowance made by the A.O. in respect of the commission expenses claimed on purchase even though the assessee could not prove the genuineness of the expenses claimed as such these expenses did not fulfill the conditions laid down in Sec. 37(1) as they were not wholly and exclusively for the purpose of the business. 3.....
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....the genuineness of the expenses claimed as such these expenses did not fulfill the conditions laid down in Sec. 37(1) as they were not wholly and exclusively for the purpose of the business. 2. The appellant craves the right to amend alter or add to any of the grounds of appeal given above." 2. All the grounds of all the appeals are revolving around the payment of commission either on sale or purchase and challenging the validity of order passed U/s 153A of the Income Tax Act, 1961 (hereinafter referred as the Act). The learned Assessing Officer observed that a search operation was conducted on 17/9/2008 in Kamdhenu Group of cases. M/s Ashiana Ispat Ltd. is the flagship company of the Ashiana sub-group. During the course of search proceedings, Shri Puneet Jain, Director of the company surrendered a sum of Rs. 7 lacs as undisclosed income of the assessee company on account of excess cash found, which had not been included in the return of income filed for the A.Y. 2009-10. However, Shri Puneet Jain had disclosed an additional income of Rs. 15.50 lacs in his return of income for the A.Y. 2009-10 on account of excess cash found at the premises of the company and at his residence and....
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....r HUF, Shri Gulshan Gupta, Shri Dharampal, Shri Anil Mahajan, Shri Anil Sharda, Shri Chander Shekhar Goyal, Shri Amit Goyal and Shri Vipul Biyani to provide details as under:- 1. File duly acknowledged copy of your income tax return for the assessment year 2003-04 alongwith computation of income. 2. File copy of the bill submitted by you to M/s Ashiana Ispat Ltd. in respect of the sales arranged during the relevant financial year against which commission payments were received by you. 3. File complete name and addresses of the parties to whom sales were made by M/s Ashiana Ispat Ltd. which were arranged by you during the relevant financial year. 4. File details regarding modus of operation, i.e. as to how you know and contact the parties and arrange and execute the sales on which commission has been earned by you. 5. For the relevant financial year, file copies of booking forms received from the customers for whom sales were arranged by you and copies of booking forms submitted by you to M/s Ashiana Ispat Ltd. for arranging the sales on which commission has been earned. 6. File details, as to if during the relevant assessment year you have received commission from any other p....
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.... 133(6) had 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 provide the addresses and telephone numbers of the customers for sale, he considered that the reasons for not supplying addresses and telephone numbers of these parties was that they do not know them and had not done any transaction with them. Had they known them and had done some transaction with them, they could have easily provided the desired information. It proved that no services have been provided by these so claimed brokers to the assessee company to earn commission. He further observed that in almost all the cases to whom such commission payments had been made by the assessee company, it is observed that the respective accounts of the brokers had been credited by them brokerage amount on the last day of the accounting year and the payments had been made in the next year. In addition, the bills raised by all these said brokers mostly had been raised on the last day of the accounting year or in the last month of the accounting year. Normal practice of the business required a bill to be raised as and when i....
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....without any commercial consideration. The assessee has not provided the addresses of the customers, addresses of the brokers, copy of order booking forms etc., which leads to the conclusion that commission paid by the assessee was without any commercial consideration or business expediency and without any service rendered by them, these transactions are sham and only a device to reduce the income of the assessee company. Therefore, he made addition of Rs. 10,61,432/- in A.Y. 2003-04. 3. For A.Y. 2004-05, the learned Assessing Officer raised the query on similar nine points, which was replied by the assessee. It is observed that the reasons of raising these queries from the assessee were two papers i.e. page No 65 of Annexure A/5 and page No. 32 of Annexure- A/5 seized from the group office of the assessee company at C-9/25, Sector-8, Rohini, New Delhi. The contents of page No. 65 of Annexure- A/5 was discussed by the Assessing Officer in para (A) and the contents of page No. 32 of Annexure-A/5 was discussed in para (B) of the assessment order in A.Y. 2004-05. The contents of page No. 65 of Annexure-A/5 is as under:- ln the case of the assessee a list of brokers as per page no. 65....
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.... Rs. 2,32,930/- and commission paid on CTD sales at Rs. 26,40,346/-. It is further observed that similar to other years, the assessee raised the commission bills on 31/3/2004. The Assessing Officer Assessing Officer issued notice U/s 133(6) of the Act to 12 brokers namely Shri Abhishek Garg, Shri Kamlesh Kumar, Shri Ashok Kumar Dang, Shri Gulshan Gupta, M/s Kamlesh Kumar HUF, Shri Maman Chand Goel, Shri Naresh Kumar Garg, Shri Sanjeev Kumar Dang, Smt. Shashi Bala Garg, Smt. Sashi Goel, Shri Sumit Goel and Shri Vipul Biyani and raised the query similar to A.Y. 2003-04 and other years on 10 points. In response to notice U/s 133(6) of the Act, only Shri Ashok Kumar Dang, Shri Maman Chand Goel, Shri Naresh Kumar Garg, Shri Sanjeev Kumar Dang, Smt. Sashi Goel, , Shri Sumit Goel and Shri Vipul Biyani replied. These parties had submitted only name of the parties to whom sales were made by the assessee through them during the year but not the address and telephone numbers. The remaining findings were identical on this issue to A.Y. 2003-04. The learned Assessing Officer relied upon the same case laws referred in A.Y. 2003-04 and held that the brokers had not provided the addresses of the c....
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.... as under:- "The said page 32 of annexure A-5 is a rough paper as pointed out by your goodself for and up to 29/03/2008. The said rough projection of the profitability of the company before commissions. Since the books were not final and year has not been ended here for only a projection was made and one had to try to know the situation, in which position we would better so as to make the arrangement of next year as the next year was nearest, whether it would be nearest on percentage or per MT basis. So this calculation was made to know in which situation we do better for you company by saving the overall cost of product manufactured by us and to increase our profitability by analysis of current year as well as keeping in view the probable market conditions of next year. Without any calculation or projection one cannot know the position of profitability of the business. Commission on ingot and the commission on CTD is paid as per the agreement entered into with the brokers/agents much before the commission is paid almost one year before, which itself shows that whole commission was paid in reality through proper banking channels and fully supported by the agreements so commission ....
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....ther it is a speaking evidence that the commission payments have been devised by the assessee at the fag end of the year only to reduce its tax liability. Though the document under consideration pertains to A.Y. 2008-09 but still the paper in question explains the modus operandi of the assessee which is equally applicable in the assessment years 2003-04 to 2009-10 which are under scrutiny assessment as per the provisions of section 153A r.w.s. 143(3) of the Act and proves the nexus between the assessee company and the so claimed brokers to reduce its tax liability at the fag end of the year." The assessee filed further reply on 16/12/2010 for A.Y. 2004-05, which was also not found satisfactory to the Assessing Officer on the basis of following reasons: "I have considered the reply of the assessee and the same is not found satisfactory in view of the reasons given herein under: (i) It is not a matter of norms of market regarding payment of commission but the moot point is whether the commission claimed to be paid by the assessee has been expended for the purpose of business, whether any services have been provided by the so claimed brokers. (ii) Plea of the assessee that we are g....
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.... on 10 points, which was identical to the other years. Only Smt. Manju Goyal, Shri Nand Lal Gupta HUF, Shri Padam Kumar Agarwal, Smt. Shimla Agarwal, Smt. Sandhya Gupta, Shri Manish Gautam, Shri Dharampal Khera, Smt. Shashi Bala Garg, Shri Maman Chand Goyal, Shri Vikrant Mahajan, Shri Anil Kumar Mahajan and Shri Naresh Kumar Garg replied. The other findings of the learned Assessing Officer was identical to A.Y. 2003-04. He also relied upon the same case laws, which was referred in A.Y. 2003-04. The assessee has not provided the addresses of the customers, addresses of the brokers, copy of order booking forms etc., which leads to the conclusion that commission paid by the assessee was without any commercial consideration or business expediency and without any service rendered by them, these transactions are sham and only a device to reduce the income of the assessee company and concluded that the commission paid on sale at Rs. 22,09,955/- was not incurred wholly and exclusively for the business purposes. 5.1 During the year under consideration, the assessee had claimed commission paid on purchase at Rs. 29,13,655/-. The assessee was asked to furnish by the Assessing Officer, the de....
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....urther observed that the commission had been paid to some ladies also, who happened to be the relatives or wives of the brokers, therefore, these ladies appeared to the Assessing Officer to be just name lenders and he found that the commission paid on sale or purchase made was a make believe arrangement between the assessee and so claimed brokers to siphon off the profit to evade tax. He relied upon the same case laws in the year under consideration and held that the commission paid on sale was not incurred wholly and exclusively for the business purposes. Thus, he made addition of Rs. 33,34,221/- in the income of the assessee (in computation it is Rs. 33,34,321/-). 6.1 Commission paid on purchase:- During the year under consideration, the assessee had claimed commission paid on purchases at Rs. 9,27,758/-. The assessee was asked to furnish the details by the Assessing Officer, but it submitted only details with respect to 2 parties to whom commission on purchases amounting to Rs. 6,04,935/- had been shown by the assessee. The other findings that bills raised by the assessee on 31/3/2006 and no payments were made during the year but made payments in subsequent year, it was not fou....
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....urchases was evident whereas commission on sale was separately mentioned in the schedule for selling and distribution expenses. In order to verify whether any payment of commission on purchases has been paid, the assessee was asked to file details of commission paid on purchases. In response thereof, the assessee had filed details in respect of four persons to whom commission payment on purchases amounting to Rs. 3,35,85,302 had been made by the assessee. On perusal of reply filed by some of these so claimed brokers, revealed that so claimed brokers had stated to have carried out the necessary transactions through telephone and that no order booking forms either from/to the assessee company or from/to the raw material supplier have ever been prepared by them. On the basis of the information received from these brokers, notices U/s 133(6) were issued to some of the raw material suppliers, for which, they have replied as under:- Raw Material supplier Reply of raw material supplier M/s Haldia Steels Ltd. As there is no information for any intermediary/ broker, so the transaction may be considered as direct sales to the party. M/s Uday Vijay Steel Pvt. Ltd. The sales were made by....
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....ake believe arrangement between the assessee and so claimed brokers to siphon off the profit to evade tax. He relied upon the same case laws in the year under consideration and held that the commission paid on sale was not incorrect wholly and exclusively for the business purposes. Thus, he made addition of Rs. 1,16,81,231/- in the income of the assessee. 8.1 Commission paid on purchase:- During the year under consideration, the assessee had claimed commission paid on purchases at Rs. 6,02,47,957/-. The assessee was asked to furnish the details but it submitted only details with respect to 5 parties to whom commission on purchases amounting to Rs. 6,02,47,957/- had been made by the assessee. The other findings that bills raised by the assessee on 31/3/2008 and no payments were made during the year but made payments in subsequent year, it was not found practicable by the Assessing Officer in the line of business. He further analysed the seized material identical to the other years of its assessment order. He found that the commission payment a make believe arrangement between the assessee and so claimed brokers siphon off the profit to evade tax. He relied upon the same case laws i....
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....in their reply sent to the learned Assessing Officer U/s 133(6) with the detail of parties to whom sales made through them with quantity sold, parties to whom sold, place from which party belonged etc.. Addresses to the brokers, PAN numbers, quantity sold with name of the parties, amount of commission given to them and copy of bank statement submitted before the Assessing Officer, sufficient time has not been provided by the learned Assessing Officer to submit the required information. There is no contradictory evidence with Assessing Officer, copy of ITR and bank statement of brokers. In past, commission payment has been accepted by the department. He also relied on the various case laws before the learned CIT(A), which has been narrated on page Nos. 12 to 14 of the CIT(A) order. The learned CIT(A) has further held as under:- "5.3 I have carefully considered the submissions of the appellant alongwith judicial citation given therein, order of the A.O. and find that this issue stands covered (as has been admitted by the appellant in the written submissions, supra) by the order of the learned CIT(A) (Central), Jaipur dated 16/03/2012 in the case of the appellant for A.Y. 2004-05 to ....
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....o. Broker Name Commission Payment during the year Page No. of P.B. A.Y. 1. Anil Sharda 54,846.00 53,016.00 140 2009-10 2 Gulshan Gupta 168,331.00 153,759.00 153 2009-10 3. Maman Chand Goel 83,298.00 79,581.00 161 2009-10 4. Naresh Kumar Garg 69,252.00 63,809.00 165 2009-10 5. Shashi Bala Garg 80,763.00 - - 2009-10 6. Sumit Goel 39,180.00 37,155.00 180 2009-10 7. Shashi Goyal 86,122.00 - - 2008-09 Total 581,792.00 387,320.00 Incidentally, brokers at sr. No. 3,4,6, and 7 have also replied directly to the A.O. in response to notice U/s 133(6). 3.1.1 Accordingly, addition to this extent of Rs. 5,81,792/- is deleted and balance addition of Rs. 20,58,554/- is hereby confirmed in A.Y 2004-05. 3.2 In A.Y 2005-06, such list of broker and commission amount paid to them is as below:- S. No. Broker Name Commission A.Y. 1. Anil Sharda 153,567.00 2009-10 2 Arun Kansal 49,916.00 2009-10 3. Gulshan Gupta 40,616.00 2009-10 4. Maman Chand Goel 46,438.00 2009-10 5. Manish Gotam 65,699.00 2009-10 6. Naresh Kumar Garg 74,999.00 2009-10 7. Shahsih Bala Garg 50,620.00 2009-10 8. Shimla Agarwal 100,350.00 2009-10 Total 582,350.00 3.2.1 Accordingly, ....
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.... the party. In view of these facts and circumstances, I see no reason to interfere in the finding of the A.O. and addition of Rs. 34,85,767 is hereby confirmed. Next bigger amounts are commission paid to Sh. Mahendra Goyanka, Sh. Jaibhagwan Goyal and Smt. Neelam Khurana and Sh. Sunil Kumar. The facts related to these parties' are also similar. In brief, neither there is any direct evidence of rendering services by these parties and nor any circumstantial evidence that these persons are having expertise and experience in dealing in commission for arranging the purchases of Ingots that too from the parties situated in iron and steel producing belt, which is geographically far away from their usual place of business. Similar is the position with other parties also. It may be added that the argument of trade practice of purchase and sale being made through brokers so taken by the A.R. may be true with reference to sales of the iron steel products but this argument is not valid in respect of purchase of M.S. Ingot etc. Accordingly, entire addition of Rs. 47,92,383/- is hereby confirmed in A.Y 2004-05. 4.2 As regards A.Y 2005-06 is concerned, in the assessment proceedings, the A.R. ....
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....ove that these persons have provided services for purchasing the M.S. Ingot and moreover, even the circumstantial evidence are against the appellant. Accordingly, addition of Rs. 9,27,758/- so made by the A.O. is hereby confirmed." 11. For A.Ys. 2007-08 to 2009-10, the learned CIT(A) considered the assessee's reply, which has been reproduced on page No. 6 to 21. The reply of the assessee was identical to A.Y. 2003-04 alongwith evidences. After considering the assessee's submission, the learned CIT(A) held that in A.Y. 2009-10, the learned Assessing Officer disallowed total commission on sale at Rs. 1,50,55,500/-. Similarly in other two years also, the entire commission on sale has been disallowed by the Assessing Officer. In A.Y. 2009-10, the commission payment shown to 62 persons, the learned Assessing Officer had disbelieved commission paid to all the parties in spite of the fact that some of them have replied directly to the Assessing Officer positively in response to notice U/s 133(6) of the Act sent by the Assessing Officer. The Assessing Officer also held that he found commission on sale not genuine on the ground that some of the brokers were having common addresses and belo....
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....ce wherein the brokers had confirmed the commission, had shown commission in their return of income and there is formal agreement with these brokers, clearly infer that commission has been paid for the services rendered by the brokers. The learned CIT(A) further held as under:- "The A.R. has also brought to my notice that the appellant company has not kept any sales and marketing network and expenditure on sales and services is not at all incurred except this commission on sales. After considering the aforesaid facts and circumstances, it cannot be said that whole of the commission so debited by the appellant company is bogus or is an afterthought arrangement to reduce profit. ON the other hand, it is also evident that whole of the commission is not allowable to the appellant company in view of the various defects which are still not met as discussed above. It is inferred that in some of the cases, the appellant has paid commission genuinely for the services rendered by the brokers and in some other cases it is just an afterthought arrangement. For this purpose, the undersigned segregated these brokers where the appellant has made proper agreement with the broker duly on sta....
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....sales brokers and therefore, the entire commission cannot be considered to be bogus or non-genuine in earlier years also. It will be unjustified to disallow the entire commission as has been done by A.O. in all the years. Particularly, it will be unreasonable to disallow entire commission in A.Y. 2007-08 and in earlier years in the present appeal order on the ground that in A.Y. 2007-08 and earlier years there is no formal agreement duly executed on stamp paper and the agreement is only on letterhead, as this would also be contrary to the generally accepted trade practice that sales are normally being made through broker, which has also resulted into increase in the sale year to year and moreover, considering the fact that appellant does not have full fledged sales and marketing team. Accordingly, a balanced approached has to be adopted while confirming disallowance considering the overall facts and circumstances for the earlier years also. It will be reasonable to infer that these 44 parties with whom the appellant has got duly executed agreement on stamp paper at the starting of the year itself in A.Y. 2009-10 have been genuinely working as sales broker even in the earlier years.....
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....e of commission shown to be paid to Shri Ruchiraraj, it is seen from the copy of the bill of Shri Ruchiraraj given to the appellant company for the so called commission on purchases that he is basically consultant and contractor and is having office at DLF Kutub Enclave, Gurgaon. No evidence has been filed by the appellant either before the A.O. or even in the appeal proceedings by way of additional evidence to prove that he has been having dealings with as much as 33 companies from whom the purchases have been claimed to be arranged by him. The appellant was well aware that A.O. has taken the adverse view and has disallowed the commission. Then it becomes all the more important on the part of appellant to file various documentary evidences so as to prove its claim. Accordingly, in absence of any proof so submitted from the side of the appellant and from the available details like the bill of Shri Ruchiraraj, it is seen that he is just 'consultants and contractors', it signifies that he does not have any expertise or experience in dealing in the purchase of ingot. Moreover, it is also noticed that during the whole year he has just issued 4 or may be one or two more invoices, as is ....
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....that three suppliers of M.S. Ingots have directly confirmed to the A.O. in response to notice U/s 133(6) that Pankaj Agarwal/Atul Bansal have contacted them for sale of their ingots to appellant company. The A.R. has furnished the details of the company M/s maruti paper Ltd. inflecting that Sh. Pankaj Agarwal and Sh. Atul bansal is Director of the company. In fact M/s VSP Udyog Pvt. Ltd. has itself mentioned that Mr. Atul Bansal, Director of M/s Maruti Paper Ltd. has worked as intermediary on behalf of appellant company. The purchases made by the appellant company from these three concerns namely M/s VSP Udyog Pvt. Ltd. amounting to Rs. 1,61,62,567/- and from M/s Yash Alloys Pvt. Ltd. amounting to Rs. 2,35,01,449/- and from Kohinoor Steel Pvt. Ltd. amounting to Rs. 56,58,723/- was through the broker M/s Maruti Paper Ltd.. It will not be proper to sustain the addition of commission amount paid on these purchases totaling to Rs. 36,25,819/- for which the parties have directly confirmed to the A.O. and accordingly addition to this extent is deleted. However, addition of balance commission so shown to be paid to M/s Maruti Paper Ltd. amounting to Rs. 29,66,626/- is upheld in view of th....
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....01,45,742/- is hereby deleted for A.Y. 2008-09. 6. Now coming to A.Y. 2007-08, the facts related to M/s Balaji Cellulose Product Ltd. are more or less same as in the case of M/s Sidhabali paper Ltd, i.e. the company is basically dealing in cellulose pulp, paper and boards and other packing material. Further neither in the main clause nor in the incidental or ancillary clause of the memorandum and articles of association of the company, there is any mention of dealing in iron or steel products that too on commission basis. Hence entire commission is disallowable subject to the observation given in foregoing sentences. A.R. has brought on record that in this case also, two suppliers namely M/s T&T Metals Pvt. Ltd. and M/s Surya Alloys Inds. Ltd. have directly confirmed to the A.O.in response to notice U/s 133(6). However, on perusal of these letters by the undersigned, it was noticed that only M/s T&T Metals Pvt. Ltd. has mentioned that they have dealt through Pankaj Rajwanshi (PB Page 138) the Director M/s Balaji Cellulose Ltd.. But in the case of M/s Surya Alloys Inds. Ltd., the letter does not indicate that the aforesaid parties have dealing with M/s Ashiana Ispat Ltd. through br....
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.... be appropriate to confirm the addition to the extent of 3/4th and give relief to the extent of 1/4th in absence of any specific reply either way from the remaining suppliers and considering that replies received from three suppliers were negative and only one supplier was positive. Therefore, out of the aforesaid remaiing amount, addition of Rs. 83,00,656/- is confirmed and balance amount of Rs. 27,66,886/- is hereby deleted. In brief the relief is allowed to the extent of Rs. 31,01,524/- and addition to the extent of Rs. 1,00,62,707/- is confirmed. 6.3 Therefore, out of total commission of Rs. 3,35,85,302/- debited in A.Y. 2007-08 and fully disallowed by the A.O., addition of Rs. 2,21,61,513/- is hereby confirmed and balance addition of Rs. 1,14,23,789/- is hereby deleted." 12. Now the assessee as well as the Revenue are in appeals before us. 13. The learned A.R. for the assessee submitted that in the assessments framed after search additions in respect of commission payments on sales and purchases by the appellant were made by the Assessing Officer. The assessee challenged the addition before the learned CIT(A), who had allowed the appeal partly in favour of the assessee. Bef....
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....ticulars have been filed before the learned A.O. viii. TDS has been deducted by the appellant assessee in respect of commission paid to brokers for sales and purchases in all the cases. The learned CIT(A) has confirmed the commission on sales in A.Y. 2003- 04 to 2009-10. The learned Assessing Officer issued notice U/s 133(6) of the Act to verify the commission paid on sales to the brokers. Some of the brokers have directly filed the reply which has been narrated by the learned Assessing Officer and confirmed the receipts of commission. This aspect has not been disputed by the Revenue. The allegation made by the learned Assessing Officer that the recipients were having common addresses. It is contended by the learned AR that it is irrelevant factor that the brokers are having common addresses when it is established that they are separate assessees having their own separate business. Various discrepancies were pointed out by the learned Assessing Officer in the assessment orders, which has been narrated in the earlier paras of this order, has been addressed by the learned AR. The learned AR submitted his argument on the basis of learned CIT(A)'s confirmation. The sales and purchase....
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....ssion agents should have been executed on legal documents instead of letter form because this not so required under any law." Therefore, the learned CIT(A)'s finding is against the law and without any basis. In A.Y. 2009-10 to all the 62 brokers, payments were made at Rs. 1,50,49,643/- as against the debit of Rs. 1,50,55,500/-, therefore, he requested to allow the entire commission debited by the appellant in P&L account on sale. 13.1 Commission paid on purchases:- The learned AR for the assessee submitted that position with regard to commission on purchases which are made through the brokers from various parties accross the country is similar to commission paid on sales., which has been facilitated through the brokers, paid commission on purchases. These are the people who inform the appellant company about the quality of the raw material and the price range and its availability. For these services, they charged commission. It is through the verbal guarantee of the brokers that the raw material is available from unknown parties to the appellant company on credit. If the raw material is not purchased through brokers the appellant company would have had to have its own market surve....
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....by the recipient. As far as commission paid to M/s Sidhbhai Paper Mill Ltd. laws as no bearing on commission paid on purchases as there is no control on the business of the recipient of the appellant, the commission bill was raised after charging of service tax by it. M/s Sidhbhai Paper Mill Ltd. has also applied for lower deduction of tax before the Assessing Officer, which has been ignored by the learned CIT(A) while passing the appellate order. Thus, he requested to allow the commission paid on purchase to M/s Sidhbhai Paper Mill Ltd. at Rs. 2,31,41,467/-. 13.3 Similarly, the assessee had paid commission on purchased at Rs. 65,92,445/- to M/s Maruti Paper Ltd.. The learned CIT(A) had given the similar findings to M/s Sidhbhai Paper Ltd.. Learned CIT(A) further held that in this case three of the suppliers namely VSP Udyog Pvt. Ltd, M/s Yash Alloys Pvt. Ltd. and M/s Kohinoor Steel Pvt. Ltd. had confirmed the supply through its Director, therefore, he deleted the addition on account of commission paid on purchase at Rs. 36,25,819/- and remaining amount of Rs. 29,66,626/- was confirmed. The learned AR submitted that the learned CIT(A) assumed same party genuine broker but not genu....
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....terial available, are required to execute the order. The remaining commission also confirmed by the learned CIT(A) on account of no experience for which the appellant relied upon same argument as given in the case of Bihar Rafia Industries Ltd. Calcutta. 13.6 For A.Y. 2005-06, the assessee has claimed commission on purchase at Rs. 10,60,201/- paid to M/s Sand Chem (I) Ltd.. The learned CIT(A) gave the identical findings that the assessee actually had not rendered any service, no experience in the line of business by way of arranging purchases of ingots except copy of bill and confirmation from party. It is submitted by the AR that bill of the supplier itself showed that these purchases were made through broker namely M/s Sand Chem (I) Ltd., which has been confirmed separately. The other allegations made by the learned CIT(A) are not relevant to confirm the addition. As already argued, in this line of business only knowledge of market, knowledge of demand and supply, quality and availability are required to arrange the goods. The learned CIT(A) similarly confirmed the remaining commission on purchases at Rs. 18,53,454/- on the basis of same argument as given in case of M/s Sand Che....
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.... fact and evidence produced by the assessee of each brokers. Therefore, she prayed to confirm the order of the Assessing Officer. She further reiterated the findings given by the Assessing Officer that to do this business, the telephone is not sufficient. The income disclosed by the brokers in every case was marginal. Particularly she has also drawn our attention on paper book page Nos. 401 and 360 for A.Y. 2009-10. In A.Y. 2007-08, the learned Assessing Officer called on one of the supplier who had denied services of any brokers in its transaction. No record had been maintained by the brokers in form of booking of order and supply of goods even sales/purchases bills does not indicate any middle man to materialize the transaction and paid them to as a brokerage. 15. We have heard the rival contentions of both the parties and perused the material on record. The assessee has filed confirmation either before the Assessing Officer or before the CIT(A). The learned CIT(A) had called remand report on additional evidence furnished before him. Besides confirmation, the appellant also submitted PAN number of the recipients and copy of return and also deducted the TDS on it. Service tax cha....
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....4. Sh. Ankit Garg 5. M/s Garg Steel 5. Sh.Ashoka Kr.Dang & Sons 6. Sh. Manchand Gupta 6. Sh. Deepak Mittal 7. Sh. Sanjay Gupta 7. Sh. Dharampal Khera 8. Sh. Vikrant Mahajan 8. Ganpati Steel Corp. 9. Garg Steel 10. Sh. Gulshan Gupta 11. Smt. Kirtika Jain 12. Sh. Manchand Goyal 13. Sh. Maman Jain 14. Sh. Naresh Kr. Garg 15. Sh. Neeraj Jain 16. Sh.Neeraj jain & Sons HUF 17. Sh. Purshotam Kr. Goyal 18. Sh. Roshan Lal Gupta 19. Sangam Buildway 20. Sangam Iron & Steel Co. 21. Sh. Sanjay Gupta 22. Sh. Sanjay Mittal 23. Sh. Sanjay Dang & Sons HUF 24. Sh. Sarthak Gupta 25. Sh. Umesh Kumar HUF 26. Smt. Vandana Jain 27. Sh. Vikram Mahajan. 28. Sh. Vikrant Mahajan. A.Y. 2009-10 Party's name 1. Sh. Anil Kr. Mahajan (HUF) 2. Bhawan Steel 3. Sh. Dinesh Gupta 4. ESS ENN Enterprises 5. Sh. Naresh Garg 6. Parash Cement, Iron & Steel Co. 7. Sh. Roshan Kumar Dua 8. Sh. Rajendra Garg 9. Sh. Sachin Gupta HUF However, in appellant's case, the commission paid to the above parties have been challenged by the department before us. It is total contradictory on part of the revenue that in one case, they are accepting these above part....
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....N, copy of return, TDS certificate, copy of bank account etc. filed by the assessee. In case of commission paid to M/s Sidhbali Paper Mill Ltd., the assessee had drawn our attention on page No. 451 of paper book and Maruti Paper Ltd. on page No. 455 of paper book for A.Y. 2008-09. For Balaji Cellulose Product Ltd. page No. 176 of paper book and Baba alloys Pvt. Ltd. page No. 153 of paper book of A.Y. 2007-08. For Bihar Rafia Industries Ltd. Calcutta page NO. 307 of paper book of A.Y. 2004-05 and for Send Chem (I) Ltd. page No. 82 to 85 of paper book of A.Y. 2005-06, which showed that the assessee had deducted TDS, payments were made through account payee cheques, given PAN number of the parties and confirmed the commission payment. The law does not require from the assessee to enter in agreement on stamp paper for claiming commission as held in the case of Chicago Pneumatic India Ltd. Vs. Dy.CIT (2007) 15 SOT 252 (Mum.). The books of account are audited which has been accepted by the Assessing Officer, sale and purchase have been treated genuine, but doubted the commission payment and the learned Assessing Officer made addition on surmises and conjectures. Therefore, we are of the ....
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....ight of a piece, that too of bundles. The assessee maintains stock on the basis of actual weighment and not on the basis of counting the piece and rows and multiplying the estimated weight. The appellant was maintained stock registers according to complying with the applicable provisions of Excise rules and regulations and regular audits were conducted by Excise authorities. No discrepancies were reported by the Excise team so far. Further the stock was not taken in the presence of any independent witness. No proper weight was taken as the sheet prepared by the search team duly reflected that they have taken all the stock on the basis of estimated weight of a piece and for a particular size etc., which was not correct because there was a loss of difference in every piece and the size of piece. Further the stock was also mixed in sizes. Not a single weighment was taken because no proof of weighment i.e. kanta receipt etc. are provided to us for actual weighment of stock and all counting were in pressure. Weight of ingot/CTD is differing per bundle and per piece, thus, the stock was valued wrongly. Further the authorized officer has taken stock of kundas about 27,170 kgs, which was n....
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....#39;ble Supreme Court in the case of Surjeet Singh Chhabra Vs. Union of India & Ors. Special Leave Petition (C) No. 14028 of 1996 order dated 25/10/1996, Hon'ble Punjab & Haryana High Court's decision in the case of Rakesh Mahajan Vs. CIT Tax appeal No. 642 of 2007 (Taxpert) and 214 CTR 218 and Hon'ble Kerala High Court decision in the case of V. Kunhambu and Sons Vs. CIT (219 ITR 235 to 243) and held that Director of the company had admitted the inventory of stock, which has been duly signed by them and no objection was raised about its authenticity at the time of search and also the employee of the company had confessed U/s 132(4) of the Act, which is binding on the assessee company. The learned Assessing Officer also analysed the specific defects mentioned by the assessee in Ingot/billers and TMT/CTD saria or scrap waste in his assessment order. After considering all the submissions of the assessee, the learned Assessing Officer concluded that the assessee had undisclosed stock of Rs. 1,31,33,368/-, accordingly he made addition. 17. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the learned CIT(A), who had confirmed the addition by....
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.... before the A.O. during assessment proceedings. Accordingly, prima facie, it appears that now the so called defect have been cited before me only with a view to try to take a chance. 8.3 Without prejudice to above, even considering the specific contended defects, the appellant has mentioned that from sr. no. 25 to 31, the ingot size has been shown as 4.5" x 4.5", but this size of M.S. Ingot was never purchased. Nor the same is anywhere reflected in the stock register. I have perused the relevant page of inventory. It is seen that in the physical stock so found from sr. no. 25 to 31 M.S. Ingot having size 4.5" x 4.5" is mentioned. At sr. no. 25, there was as many as 385 pieces of 49 inch length. At sr. No. 26, there are as high as 403 pieces of 56 inch length. At sr. No. 27, there are as high as 577 pieces of 52 inch length. Similar is the position at sr. no. 28, 29 and 30. At sr. No. 31, there are as high as 1074 pieces of 54 inch length. It is impossible to presume that the concerned staff of thte appellant company and even the directors had made mistake while telling/specifying the size of these ingots as 4.5" x 4.5" and it is further impossible to presume that such mistake occu....
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....e discrepancy is very minor, wherein A.R. has pointed out about 97.2 kg at sr. no. 2 of page 7 and 97 kg at sr. no. 34 of page 8. It is a case is just ignoring the figure after decimal. As regards difference in the weight of 16 mm x 40 ft TMT Bar taken at sr. no. 18 and 55 of page no. 8 having average weight 94 kg and at sr. no. 59, 74 and 80 of page no. 9 having average weight of 98 kg, it transpired that weight of bundles may vary between 3 to 4 kg. Accordingly, it cannot be said to be a mistake, more particularly when the search team has written this weight at the instance and advise of concerned experiences staff of the appellant. Other contended defects are in fact no defects, in view of the fact that these weights have not been taken by the search team on its own but have been taken at the instance and advise of the experienced staff of the company, which has been seen/checked and duly signed by both the directors of appellant company. 8.5 Hence the various arguments taken by the A.R. are rejected and addition on account of unexplained investment in excess stock of various items as worked out by the A.O., totaling to Rs. 1,31,33,368/- is hereby sustained." 18. Now the asses....
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....of Haribhagat Agarwalla Vs. State of Orissa, 51 STC 355 (Orr). It was held that no addition could be made on the basis of difference of stock arrived at by sampling method. It was held in that case that assessing authorities were not justified in estimating the value of stock without physically weighing them, particularly when the assessee maintained regular books of accounts which were checked by the Central Excise authorities from time to time. It is further contended that in the stock list "B" at serial No. 9 and 10 the physical count is not mentioned and the weight is written at 40000 kg and 10000 kg respectively. This goes to show the casual approach adopted by the department in stock taking. The books of account are accepted as such and stock is subject to verification by the excise authorities. In A.Y. 2003-04, 2004-05, the scrutiny assessment was made U/s 143(3) and no addition has been made against the stock. The alleged variation in the weight of stock is less than 10%, which is attributable to the eye estimate by the department, therefore, he prayed that the addition made by the Assessing Officer and confirmed by the learned CIT(A) leading to discrepancies in stock deser....
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....ired to more than week's time. The learned CIT(A) also verified the size of physical stock of M.S. Ingots with the inventory prepared with purchase bill. She further argued that if this physical stock so found is not mentioned in the stock register, as claimed by the A.R. then obviously it is the stock outside the books of account. Hence this argument that M.S. Ingots of this size was not officially purchased and was not available in the stock register. Therefore, the same may be confirmed. 20. We have heard the rival contentions of both the parties and perused the material available on the record. The authorized officer gave the copy of panchnama at the end of search, but no copy of statement and copy of stock inventory taken at the time of search, which was asked to supply by the appellant on 06/9/2010. When the scrutiny assessment proceedings were started by the Assessing Officer, he supplied the copy of statement alongwith copy of inventory and copy of statement of various persons on 13/09/2010 to the appellant. Thereafter, the appellant filed reply before the Assessing Officer on 16/12/2010 and made objections before him that stock taken at the time of search operation was on....