AI Drafter 
TaxTMI 
TaxTMI 
2016 (3) TMI 41
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.... "1. On the facts and in the circumstances of the case, Learned CIT(A) erred in confirming that the provisions of Chapter XIV-B are applicable to the facts of the case and accordingly the assessment made under Section 158BC read with Section 143(3) of the Income Tax Act is valid. 2. On the facts and in the circumstances of the case, Learned CIT(A) erred in confirming that the principles of Natural Justice were adhered to in the assessment proceedings and therefore the assessment made is valid. 3. Without prejudice to the foregoing, appellant pleads that Learned CIT(A) erred in confirming the disallowance of sub-commission of Rs. 1,83,36,710 paid to M/s. Airwings Travel and Cargo Pvt. Ltd. and Airtrac Agents (India) Pvt. Ltd. 4. Without prejudice to the foregoing, appellant pleads that Learned CIT(A) erred in not appreciating the fact that the entire sub-commission paid to Airwings Travel and Cargo Pvt. Ltd. and Airtrac Agents (India) Pvt. Ltd. have been offered for taxation in the earlier years by the respective recipients and their status was accepted as such in the past and therefore the amounts cannot be brought to tax in the block period of the app....
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.... and Mr. S. Ravisankar, a Director in M/s. Airtrac Agents (India) Pvt. Ltd. Assessing officer observed from the statements recorded of the above persons that it was proved beyond doubt that the two companies who received sub commission from the assessee existed only in paper. The Director of Airtrac in his deposition could not bring out who actually managed its employees and what were the services rendered to the assessee for which they received remuneration. Regarding the premises from where the two companies were shown to be functioning, AO gathered information by recording statements from the son of the builder/owner and it turned out to be that in one case the possession of the premises itself was not given and in the other case it was found during search action that the premise was used as godown of the Assessee company. The AO raised doubts on the existence of employees and the nature of services rendered by them, their capability to render such services, the availability of infrastructure and managerial capabilities of the said two companies, for which they were stated to have been paid commission. AO concluded that Shri Ravishankar, Director of Airtrac did not come to the o....
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.... Returns, Challan of Profession tax etc.and further in relation to M/s Airtrac Agents (India) Pvt. Ltd.: the copy of agreement for purchase of office at Sahar Roy Appt. dated 23-02-1996.; Receipts of society charges paid; Bank statements; Salary Sheets, TDS paid challans; Profession Tax Registration; Telephone Deposit Receipt; Clients letters; Correspondence with I.T. dept. etc. The Ld. A.R. has further submitted that after obtaining copies of statements recorded u/s 132(4) from the AO, Shri M.D. Hansotia, M.D. of the Assessee company, retracted his statement. He has further stated that the assessee had also filed affidavit of Mr. M.D. Hansotia, retracting the statement given by him during the course of Assessment proceedings. Further that the recipients of the sub-commission had sufficient infrastructure to render the services to the assessee. That the AO has not discussed about the other rented premise which were in the occupation of those two companies, which were adequate to carry on the business by the two respective companies. The Ld. AR has further submitted that with regard to the employees functioning in these two companies, the muster roll, salary register, the employe....
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....lowed as deduction and it is only the net income of those two companies that ought to have been brought to tax in the Block Assessment of the Assessee. The ld AR has further made following written submissions in respect of points raised and case laws relied upon: "GROUNDNO1-ITEMS OUTSIDE PURVEW OF BLOCK ASSESSMENT. 1) At the outset, no incriminating material/evidence found during course of search with regard to disallowance of commission paid to Airwings Travel and Cargo Pvt Ltd Rs. 1,12,58,843/- and Airtrac Agents (India) Pvt Ltd Rs. 70,77,867/- [CIT v. BHUVANENDRAN 303 ITR 235 (MAD) [PGS 5 OF JUDICIAL PRECEDENT PAPERBOOK (JPPB)]; CIT v. TEMPLETON 337 ITR 541 (BOM) [PG 10 OF JPPB]; GO6v. DCIT 346 ITR 106 (AP) [PG 16 OF JPPB]. 2) Addition cannot be made in block assessment merely on the basis of statement recorded under Section 132(4) [CIT v. BHUVANENDRAN 303 ITR 235 (MAD); DCIT v. OKASA 10 SOT 164 (MUM) [PGS 30, 31 OF JPPB]; DCIT v. PRAMUKH 115 TTJ 330 (AHM)(TM)[PGS 41, 42, 43, 52, 53 OF JPPB]; CIT v. CHINNASWAMY 350 ITR 694 (MAD) [PGS 63, 65 OF JPPB]; SHREE GANESH v. CIT 84 CCH 25 (JHAR) [PGS 69, 70 OF JPPB]; EDULJI v. DCIT DATED 27.12.2004 (MUM) [PG 14....
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....were not recorded under coercion, hence the same were rightly relied by the AO. He has also objected to the deletion of addition by the CIT(A) in respect of commission and incentives received by Air track from other companies. 8. We have heard the rival contentions and have also gone through the records. It is an admitted fact on the file that no incriminating material was found during the search action. It is also a fact on the file that both the sub agent companies have been regularly assessed to income tax at the same rate of tax at which the assessee company is taxed. The assessee company has not only paid commission to the above stated two companies but has paid commission to various other parties. The Ld. AR in this respect has invited our attention to various documents placed in the paper book to show that the assessee company had been paying commission to various sub agents for procuring business for the assessee. The Ld. A.R. has also invited our attention to P & L Account of the Airwings as well as of the Airtrac and the various assessment orders for different assessment years wherein the said companies have consistently been assessed to income tax and have offered the....
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.... page 334 of the paper book-1 to show that in the assessment year 1998-99 the assessee company paid a total commission of Rs. 18962963/- to almost 40 parties including Airtrac Agents and Airwings Travel. Similarly in the assessment year 1990-91, a total commission was paid to 55 parties totaling Rs. 12542523.14 out of which an amount of Rs. 958444/- was paid to Airwings Travel. The Ld. A.R. has further invited our attention to page 53 of paper book-1 to show that for the A.Y. 1991-92 the commission was paid to 54 parties totaling Rs. 17886688.71 out of which commission of Rs. 1256782/- was paid to Airwings Travel. The Revenue has never doubted the payment of commission to any of the sub agents in the past. It was also explained that both the above sub agents have been paying tax at the same rate at which the assessee company was paying and that there was no question of shifting burden of income tax or evasion of any tax. It was also explained that the assessee company had no direct relation with the above sub agents. So far as the contention of the Department that there was no infrastructure of employees available with the said sub agents, the Ld. A.R. of the assessee has brough....
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....e of the search but it is a question of interpretation of the evidences. The above observations of the AO makes it clear that even the AO was of the view that no direct evidence was found during the search action and that the additions were made on the basis of interpretation of evidence. Under the circumstances, it can be gathered that even the AO was of the view that there was no direct incriminating evidence found against the assessee during the search action. We further find that even the Ld. CIT (A) in the impugned order has discussed that Airtrac had derived commission and incentives from other Air Lines also. The ld. CIT(A) has given a categorical finding that the AO had not brought any material on record in support of his conclusions that either these incomes relate to the same business in respect of which Assessee paid commission to Airtrac or to the effect that Assessee had diverted these incomes to Airtrac. The basis for coming to such conclusion by the AO does not find mention in the assessment order. 10. Moreover, the above stated two companies have been regularly filing their returns of income with Income Tax Department. The income returned was duly accepted in var....