TaxTMI 
TaxTMI 
TaxTMI 
2013 (1) TMI 816
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....assessee was not proved conclusively. 2. That the CIT(A)-I, Agra has erred in law and on the facts of the case in deleting the addition of Rs. 73,365/- made on account of traveling expenditure, inspite of the fact that the rendering of services, related to the business of the assessee was not proved conclusively. 3. That the order of the CIT(A)-I, Agra is erroneous in law and on the facts of the case and that the order of the A.O. be restored. 4. That the appellant craves leave to add or delete or alter or modify any ground during appeal proceedings." 3. The brief facts of the case are that the assessee-company is engaged in the business of manufacturing of Fire Fighting vehicles and equipments. Main customers are Ministry of Defence, Indian Air Force, Ordnance Factory, Indian Oil Corporation, Gas Authority of India Ltd., Oil and Natural Gas Corporation, Steel Authority of India, various fertilizers, Unite State Government and other Government/semi-Government organizations and other private companies. During the course of assessment proceedings the A.O. noticed that the assessee has debited sum of Rs. 33,69,903/- in Profit and Loss Account under the head commission. The asse....
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....re is nothing in the record of the company except copy of agreement with M/s. SandS Traders, Srinagar. The correspondence with this party is not available. The A.O. noticed that the document of agreement did not bear the signature of any witness as it was a confidential document. Original copy of agreement was not available with him. Shri Shaukat Ahmad worked as liaison officer for them for seeking orders for supply and to get payment released from Fire and Emergency Services, Srinagar. Shri S.C. Agrawal further explained that commission paid to Shri Shaukat Ahmad during the financial year 2004-05 was for the services rendered during the financial year 2003-04. The Director of assessee's company also explained in its reply dated 21.08.2007 that Shri Shaukat Ahmad was dealing person and he did not know in what capacity he was working in his firm whether partner or manager. No correspondence made with him was available. All dealings were made verbally by meeting or on telephone by Shri M.C. Agrawal from Delhi Office. Father's name of Shri Shaukat Ahmad is not mentioned in the agreement. No other address of Shri Shaukat Ahmad is known to him. 6. Statement of Shri Sunil Kaul, ....
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....g. Sir, Kindly refer your letter No. ACIT-3/MTR/Scrutiny/BHUL/2007-08/206 dated 31.8.007 regarding the subject cited above. n this connection the requisite information is detailed as under:- (1) Details of supplies made by M/s. BHUL to this Directorate and subsequent payments released from 2003-04 onwards are shown in Annexure "A". (2) As per records available in the direction Office Shri Sunil Kaul, service engineer of the company, was attending the meeting and other works on behalf of M/s. BHUL from the year 2004-05 to 2005-06. (3) Not pertaining to the Department. (4) As per records, no person by name of Shri S. Ahmad/Shri Showkat Ahmad/Proprietor/Partner/Employee of M/s. SandS Traders has been attending on behalf of/agent of M/s. BHUL. Yours faithfully S/D-Directorate General Fire and Emergency Services J and K, Srinagar. 8. The A.O. asked the assessee to produce M/s. Shaukat Ahmad personally for evidence but the assessee-company failed to produce him in spite of several opportunity given to the assessee. The A.O. noticed that the company merely filed an affidavit of alleged Agent Shri Shaukat Ahmad. The A.O. was of the view that such affidavit has no evidential v....
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....ssee to furnish all the supporting evidence regarding the genuineness of the any expenditure. The A.O. relied upon a judgment in the case of Laxmi Ratan Cotton Mills Co. Ltd. vs. CIT (1969) (S.C.) rep in 37 ITR 634 wherein it was held that "The burden of proving that service were rendered by the managing agents to justify the allowances of his remuneration as an expenditure incurred wholly and exclusively for the purpose of the business was on the assessee. If no reliable evidence was forth coming, the Tribunal was competent to reach the conclusion that it was not allowable. The recitals in the managing agency agreement could not be substitute for such evidence and did not discharged the burden placed on the assessee. Similarly in another case reported 125 ITR 293 (S.C.) L.H. Sugal Factory and Oil Mills (P) Ltd. vs. CIT held that where an assessee claim a deduction the onus is on him to bring all material facts on records to substantial his claim". 11. Apart from above facts, it has also been noticed by the A.O. that the amount of commission relates to the Financial Year 2003-04 relevant to the A.Y. 2004-05 and further no TDS were made during the year at the time of its credit. TD....
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....ement, it is evident that in spite of taking three opportunities and sufficient time of about two months the witness could not support his affirmations and replies conclusively and with corroborative evidences. Resultantly, the conclusions and inferences drawn by the then A.O., in the assessment order, after examining the facts material of the case in details, could not be contradicted. The salient pointed emerging from the statement of the witness are summarized as under:- 1. Credentials of the witness being a consultant of fire fighting equipments on the basis of his having some technical qualifications is not supported with any valid Diploma or certificate. (Ref. Q. No. 5 and 6). 2. He did not produce any bank account details, books of accounts, head wise computation of income, final accounts from which his claim of commission receipt from the assessee and its accounting could be verified. Rather the witness has categorically admitted that no books of accounts were maintained by him. (Ref. Q. No. 3,4,5,8 and 10). 3. Returns of income for the three A. Yrs. i.e. 2005-06, 2006-07 and 2007-08 claimed to have been filed on 4.10.2008 (on one day after due dates) and even their o....
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....n in the name of this person is framed and concocted one and is liable to be rejected." 14. The report dated 12.05.2009 of the A.O. was forwarded for rejoinder to the appellant. Vide letter dated 19.08.2009, the appellant furnished counter-comments which have been reproduced by the CIT(A) in his order as under:- (pages 29 to 32) "As directed by your honour, the assessee company has produced Sh Shafat Ahmed Prop of M/s. S and S Traders Sri Nagar Jammu and Kashmir on 11/05/2009 before the assessing officer at Income Tax Office Mathura. The assessing officer recorded the statement of Sh Shafat Ahmed on that day. The assessing officer gave his report which is totally unjustified and did not present the true picture of the statement recorded. However our para wise reply to the assessing officer report is as under:- 1. Credential of the Witness:- The witness has clearly stated that he is 10+2 Pass from JandK and has undergone training programme conducted by JandK Fire and Rescue Deptt in Srinagar. It may be mentioned here that Fire and Rescue Deptt is handled by the State Government which generally run by the Police Deptt of the respective State. There is no college in India which....
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....:- 1. Laxmi Rattan Cotton Mills Co. Ltd. vs. CIT(SC) reported in 37 ITR 634 page. 2. L H Sugar Factory and Oil Mills (P) Ltd. vs. CIT reported in 125 ITR 293 (S.C.) In Laxmi Rattan Cotton case the apex court held that "The burden of proving that services were rendered by the managing agents to justify the allowances of his remuneration as an expenditure incurred wholly and exclusively for the purpose of the business was on the assessee. If no reliable evidence was forth coming, the Tribunal was competent to reach the conclusion that it was not allowable. The recitals in the managing agency agreement could not be substitute for such evidence and did not discharge the burden placed on the assessee. In L.H. Sugar case the apex court held that where an assessee claim a deduction, the onus is on him to bring all the material facts on records to substantiate his claim. From the above and to claim the expenditure, the following is must:- 1. That the assessee in fact has received the services of commission agent for which payment has been made. 2. That all the materials which proves the claim of the assessee should be brought before the assessing officer. 1. Providing of Se....
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..... He has also produced the self certified copies of the acknowledgement of filing of his returns before the assessing officer ward-4 (sic) Range. He has also confirmed the affidavit filed during the course of asst. The assessee company has provided all the material and details to the assessing officer in support of its claim of payment of commission. These materials/evidences are sufficient to claim the expenditure. In view of the submissions as stated above and in view of the statement of Shafat Ahmed, it is established that the report of the assessing officer is unjustified, unwarranted and bad in the eye of law and hence liable to be rejected. Your kind attention is also drawn towards the case decided by Honorable Gujarat Court in VOLTAMP vs. CIT 129 ITR 105 in which the court justified the payment of commission as per the agreement. In view of the submissions as given above and above earlier submissions give from time to time and statement of Shafat Ahmed recorded by the assessing officer, it is established that the assessee company has paid the commission for the purpose of business which is justified. The addition made on this account by the assessing officer is unjus....
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....tatement of Shri Shafat Ahmed was recorded by the AO, on 11.05.2009. In answer to Q. 1, Shri Shafat Ahmed has sated as under:- "Ans. I am Sheikh Safat Ahmed 510 Sheikh Ahmed resident of Aribagh Colony, Manohwat, P.O. Nati Par, P.S. Chadora, Sri Nagar (JandK). I am the Proprietor of M/s. SandS Traders, located at Batamaloo, Srinagar. I am carrying on business of liaisoning of and after sale service of fire fitting equipments and other allied items under the proprietorship concern since last 10 years. I am also the proprietor of M/s. Rex Electronics, Batmaloo which is engaged in the trading of electronics goods. I am assessed to tax and my PAN is AGIPA0222A. I am filing my return of income under ITO Wd.-4, Srinagar. I am submitting photocopies (self attested) of acknowledgements of filing of return of income for the A. Y. 2005-06, 2006-07 and 2007-08." However, the witness did not produce books of accounts, head-wise computation of income, bank account details, agreement and correspondence with the appellant company, etc. On this basis the AO observed in the remand report dated 12.05.2009 as under:- "In view of the above, it is clear that the claim of the assessee about alleged....
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.... obtained and concluded merely by the said trips of Shri Sunil Kaul who is essentially in-charge of commissioning, testing, operations, use and after-sales service though he was also deputed for filing tender, attending meetings etc. on behalf of the appellant company. In the letter dated 29.09.2007, the Director General, Fire and Emergency Services, JandK, Srinagar has stated as under:- "2. As per records available in the direction office Shri Sunil Koul, service engineer of the company, was attending the meeting and other works on behalf of M/s. BHUL for the year 2004-05 to 2005-06. 3. ** ** ** 4. As per records, no person by name of Shri S. Ahmad/Shri Showkat Ahmad/Proprietor/Partner/Employee of M/s. SandS Traders has been attending on behalf of/agent of M/s. BHUL." Thus, evidently Shri Sunil Kaul represented the appellant company in the official dealings as its representative. Therefore, his name appears in the official records of the said Govt. Department. The appellant has consistently maintained that Sheikh Shafat Ahmed was its local liaisoning agent and not its official representative. The appellant has filed photocopies of letters and relevant bids as under:- 07....
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....**] and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". [Explanation:- For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.] (2) 17 ** ** ** (2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party. 18. In order to claim deduction of expenditure under section 37(1) of the Act, following conditions should be satisfied:- i) The expenditure in question should not be of the nature described under the specific provisions of sections 30 to 36 and 80VV (section 80VV was omitted with effect from April....
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....cles and Equipments. Main customers are of Defence, Indian Air Force, Ordnance Factory, Indian Oil Corporation, Gas Authority of India Limited, Oil and Natural Gas Corporation, Steel Authority of India, Unite State Government and other Government and Semi-Government organizations and other private companies. The assessee claimed 10% commission on sale of fire fighting vehicles to Director of Fire and Emergency Services, JandK which is an undertaking of Government of Jammu and Kashmir (JandK), Srinagar. The commission was paid to Shri Shaikh Shafat Ahmad, Prop of M/s. SandS. Traders, New Colony Batamlloo, Srinagar (JandK). The A.O. disallowed the claim of assessee on the ground that commission was not paid for the purpose of business. The commission was not paid against actual services rendered. The recipient of commission is name lender of Assessee Company. Under the facts and circumstances of the case, whether the assessee has discharged the burden that commission expenditure has been laid out or expenditure was wholly or exclusively for the purpose of business, so that the assessee may be entitled for claiming deduction of business expenditure of the assessee. In the case under c....
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....ertain things which were created by the assessee subsequently in support of the claim. The recipient has filed return subsequent to enquiry started by the A.O. An earlier contention of the assessee that Shri Shaikh Shafat Ahmad is assessed to tax was found false. Let us see how CIT(A) satisfied regarding services rendered and how this objection of the A.O. has met out by the CIT(A). To better appreciate this aspect, we would like to refer the relevant abstract of the order of CIT(A) from page nos. 37 and 38 of her order which has been reproduced in paragraph no. 15 of this order. The CIT(A) on the basis of his own assumption and presumption tried to justify that services were rendered against commission paid. On carefully going through the entire order of CIT(A) particularly above abstract of order of CIT(A), we find that the assessee as well as recipient both failed to furnish any evidence to support that the commission was paid against services rendered. As discussed above that in this regard burden of proving is on the assessee as the law laid down by the Apex Court in the case of CIT vs. Calcutta Agency Limited, 19 ITR 191 (SC) whereas the CIT(A) in paragraph no. 3.16 page no. ....