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2013 (1) TMI 816
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....he rendering of services, related to the business of the 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 o....
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....anaging Director of assessee-company on 21.08.2007 in which it was affirmed that there 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 oth....
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....Bye-Pass Road, Mathura (Delhi office at A-28, Hauz Khas, New Delhi-110016) for the A.Y. 2005-06 Reg. 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 t....
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.... The A.O. further observed that it is duty of the assessee to prove the genuineness of the expenditure claimed by him. Burden lies on the assessee 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 commissi....
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....n the issues related to the assessment under appeal. A copy of his statement, running into 13 pages is enclosed herewith for kind perusal. A perusal of the statement, 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....
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....e claim of the assessee about alleged commission is not genuine. It has not been proved that the alleged person was providing any sort of service to the assessee company related to its business activities. Hence, the claim of the commission 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 undergo....
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....sing of payments. 9. The witness told that due to disturbances in Jammu and Kashmir, he could not file his return of income within the time allowed. Submissions by the Company:- In the body of assessment order, the assessing officer has given two citations of Hon Supreme Court of India which are as under:- 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 ....
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....med. All the above materials have been placed before the assessing officer. The above material is sufficient to justify that the commission has been paid by the assessee company to Shafat Ahmed. In his deposition before the assessing officer, Sh Shafat Ahmed confirmed that he has provided the services and in lieu of services he has received the commission from the assessee. The identity of Shafat Ahmed is also established before the assessing officer. 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 ....
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....ently, the said person filed his return on detection of his taxable income. Thus, there was a default on the part of the said person and not the appellant who had claimed the impugned expenditure in its return and done TDS there from, which was duly filed with the return of income. The CIT(A) also noted certain facts and observations thereon which are as under:- "that in the course of appellate proceedings, the appellant was directed to produce Shri Shafat Ahmed before the AO for his examination. The statement 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 filin....
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....To take and execute the contracts in Jammu and Kashmir, continuous pursuit and follow-up was required locally. Vide submission dated 12.01.2010, the appellant has stated that apart from Sheikh Shafat Ahmed only Sunil Kaul visited Jammu and Kashmir in connection with the contracts. Shri Sunil Kaul traveled 6 times to Jammu and Kashmir and his total traveling expenses were Rs. 69,708/- in A.Y. 2005-06. In A.Y. 2006-07, he traveled 9 times to Jammu and Kashmir and his traveling expenses were Rs. 56,477/-. It would be unrealistic to say that the entire contract could have been 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.....
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....ance of Rs. 33,69,903/- is hereby deleted." 16. We have heard the ld. Representatives of the parties and records perused. The issue to be examined in the case under consideration is whether commission of Rs. 33,69,903/- was paid against services rendered. Whether under the facts and circumstances the assessee has discharged its burden in this regard. To examine these issues, we would like to refer he relevant provision and scheme of the Act. 17. Business expenditures incurred for the purpose of business are allowable under section 37 of the Act. The said section 37 reads as under:- 37.(1)- "Any expenditure (not being expenditure of the nature described in sections 30 to 36 [***] 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 deeme....
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....the same was proved to be incurred in accordance with section 37(1) of the Act. The onus of proof is upon the assessee. It is for the taxpayer to establish by evidence that a particular allowance is justified. Therefore, if the assessee fails to place sufficient material, he is not entitled to claim this allowance under section 37(1) of the Act. In CIT vs. Chandravilas Hotel [1987] 164 ITR 102 (Guj), it is held that if the expenditure is doubted by the assessing authority, it is the duty of the assessee to prove by leading evidence that the expenditure was in fact, incurred. 20. In the light of above discussion, if we consider the facts of the case, we find that the assessee company is engaged in the business of manufacturing of Fire Fighting Vehicles 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 a....
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....urnish any correspondence or material to justify the commission received. The A.O. found that the assessee failed to furnish any evidence in support of the claim that commission was paid against the services rendered. 21. The CIT(A) deleted the addition on the basis of certain irrelevant facts brought to the notice by the assessee that amount is paid by cheques, The assessee claimed traveling expenses claimed to be incurred for traveling of Commission Agent Shri Ahmad came to Delhi and Mathura. Such material in the shape of evidence can be created by the assessee after taking in to confidence of other person. Such evidence cannot said to be in support of the fact that services were rendered against commission payments. Contrary to that, we noticed certain 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 r....
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....h evidence to support the claim that commission was paid against services rendered. Whatever details filed by the assessee and considered by the CIT(A), such routine details can be submitted in a number of cases to demonstrate false payment of commission. When an assessee is manufacturing fire fighting vehicle and equipment and sale is made to a unit of State Government, service of Agent, if any, must be accordingly to that level. The commission agent must have the technical knowledge of product, having capacity of salesmanship, having capacity or to provide services in realizing sale consideration etc. But in the case under consideration, the supply was made to Government Department. We do not think that recovery of sale consideration was in doubtful condition. So, any service is required for realization of sale consideration. Further, supply to Government Department is also not required any middleman or Agent as the Government Department itself is having sufficient infra-structure in this regard. Thus, the assessee has completely failed to furnish any evidence or material based on which it can be said that the commission was paid against services rendered. 22. It is not the ca....