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TMI Blog2014 (12) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... mission - CIT(A) specifically mentioned commission paid to M/s SKT on purchase, who is dealing in Tissue paper, craft paper, card board and other types of boards etc., in A.Y. 2008-09 – assessee submitted that details of commission paid to it on purchases made by the assessee along with copy of bills, confirmations and bank statements of assessee company evidencing the payment of commission has been filed before the CIT(A) - It also filed copy of agreement dated 21/3/2007 between assessee and M/s SKT - the assessee had deducted TDS at ₹ 3,94,757 - the assessee had paid this commission in subsequent year to M/s SKT after deducting TDS - additions confirmed by the CIT(A) deserve to be deleted – Decided in favour of assessee. - I.T.A. Nos. 662 to 668/JP/2012 - - - Dated:- 21-11-2014 - Shri R. P. Tolani And Shri T. R. Meena,JJ. For the Petitioner : Shri Satish Agarwal Shri Harish Agarwal. For the Respondent : Smt. Roli Agarwal. ORDER Per: T. R. Meena, A. M. The present group of seven cases filed by the assessee are against the orders dated 18/5/2011 for the A.Ys. 2003-04, 2004-05, 2005-06 and 2006-07 and dated 17/5/2012 for A.Ys. 2007-08, 2008-09 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 ₹ 9,70,315/- 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 AAGHA2851R Ashish Sons (HUF) 80,319 2. AACPD4106G Ashok Dang 100,590 3. AIVPK1130G Anuj Global Corporation 350,305 4. AERPG2141P Chander Shekhar Goyal 150,066 5. AJMPM6714G Kanta Modi 100,595 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 of commission expenditure was made by the Assessing Officer in the assessment completed U/s 143(3) of the Act. 5. That the appellant craves leave to add, alter or delete the above grounds of appeal at the time of hearing. Ground of ITA No. 665/JP/2012 (A.Y. 2006-07) 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 lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teria 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. ABIPA5888R Kadambari Steel Suppliers 378,293 9. AJUPG0987B Pankaj Garg 100,509 10. AAHPG2010K Rajni Gupta 125,894 11. AAFHR7717G Ratan Lal (HUF) 92,585 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormal agreement with the appellant company on stamp paper or on letter head. 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 expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer for payment of commission on facilitation of purchases. S. No. PAN Name of party Amount of commission 1 AAMPA5140M Abhinal Agarwal 50,511 2. AAEHA3305L Abhinav Agarwal (HUF) 299,076 3. AADFA0428P Agarwal Steel Corporation 200,639 4. AARPA7598J Anjani Sales 35,717 5. ABIPJ3972H Anup Kumar Jindal 505,085 6. ABBPJ3940N Arun Jindal 503,749 7. AFJPJ9092H Dhruv Jain 201,775 8. ABAPA4427A Ghanshyam Agarwal 191,855 9. AAAPJ1806B Ravi Jain Corporation 201,846 10. AIFPK7469L Sushil Agarwal 227,788 11. AASPK3157C Umesh Kumar 150,505 12. AAAHU3590H Umesh Kumar (HUF) 397,046 Total 2,965,592 2.1 That the learned Commissioner of Income Tax (A) has gros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mdhenu sub-group. This sub-group is mainly engaged in the business of manufacturing of iron bars like TMT bars. It has further diversified in the field of Paints. Shri Satish Kumar Agarwal defacto head of the faction/family has surrendered an amount of ₹ 5.71 crores as unaccounted/undisclosed income of the group/family, in his statement recorded during the search U/s 132(4) of the Act on behalf of the group/family, which was confirmed by other members of the family. The surrender of income was under various heads like unaccounted cash, investment in property, jewellery, investment in various companies of the group as share application money. The surrender was persons specific. Although the group has honoured the surrender of income, it has made during the search but the amounts declared as additional income by many members of the group differ from the amount surrendered during the search. In case of assessee M/s Kamdhenu Ispat Ltd., no income was surrendered during the search. As such, during the year under consideration, no additional income has been declared on account of undisclosed/unaccounted income. The assessee filed returned income on 30/6/2010 in pursuance to notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Kamdhenu Ispat Ltd. for arranging the sales on which commission has been earned. 4. Pl. state whether you have provided similar services to any other person or concern as you have provided to M/s Kamdhenu Ispat Ltd. if yes, please file copy of ledger a/c of all such persons from whom commission payments were received by you during the relevant financial years. 5. What was the nature of business or profession carried out by you during the relevant financial year? 6. During the relevant financial year, have you carried out any activities other than arranging sales for M/s Kamdhenu Ispat Ltd. 7. File copy of ledger account of M/s Kamdhenu Ispat Ltd. in your books of account for the relevant financial year. 8. File copies of bank account statements showing the receipt of payments from M/s Kamdhenu Ispat Ltd. for services provided by you during the aforesaid period. Please note that the bank account statement(s) is (are) required to be submitted for the complete financial year during which such payments have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sh. Suresh Chand Garg, Sh. Naresh Garg,, Sh. Ankit Garg, Sh. Umesh Garg, M/s Super Enterprises, Sh. Sarthak Gupta, Sh. Jagdish Manchanda, Sh. Dharampal Khera, M/s Ishan Enterprises, Sh. Anil Sharda, Sh. Arun Prakash Biyani, M/s Ganpati Steel Corporation, M/s Gaurang Steel (P) Ltd. M/s Agarwal Steel Corporation, M/s Garg Steel, Sh. Naman Jain, Sh. Neeraj Jain, M/s Neeraj Jain Sons (HUF), M/s Jhelum Industries, Sh. Gulshan Gupta, Ms. Neha Modi, Sh. Maman Chand Goyal, Sh. Deepak Mittal, Ms. Rekha Sharma, Ms. Kirtika Jain, Ms. Vandana Jain, Sh. Sanjay Mittal, Sh. Rattan Lal, Sh. Purshottam Kumar Goyal, Sh. Roshan Lal Gupta, Sh. Sanjay Kumar Gupta to provide details and documents. A.Y. 2009-10 Notices U/s 133(6) of the Act were also issued to the brokers namely M/s T.K. Choudhary, M/s Suresh Chand Garg (HUF), M/s Satish Chand Garg (HUF), M/s Sanjeev Dang Sons (HUF), Sh. Sanjeev Mittal, Sh. Sanjay Kumar Gupta, Sh. Naresh Kumar Garg, Sh. Naresh Garg,, Sh. Maman Chand Goyal, M/s Global Marketing Co., M/s Garg Steel, M/s Ganpati Steel Corporation, Sh. Dharampal Khera, Sh. Ankit Garg, Sh. Anil Sharda to provide details and documents. 2.1 The similar reply was submitted for all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Naresh Kumar Garg, Sh. Maman Chand Goyal, Sh. Anil Sharda, M/s Ganpati Steel Corporation, Sh. Ankit Garg, M/s Suresh Chand Garg (HUF), M/s Satish Chand Garg (HUF), Sh. Sanjay Mittal replied. 2.2 The learned Assessing Officer observed that all the years that information sought from the above brokers was not provided by them on due date of compliance. Most of them sought adjournment at one pretext or the other and some of them even did not seek adjournment and complied the notices at their sweet will, most beyond the due date of compliance. The information or documents sought must be readily available with them and there was no need to seek adjournment or delay the providing of information. It is further observed that it was surprising to him that even after taking more required time to comply, so claimed brokers only gave names of the parties to whom sales were made by M/s Kamdhenu Ispat Ltd. through them during the year but 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 was the only source of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neration against it after 6 months or a year. It is also observed that commission has been paid to some ladies also in A.Y. 2005-06 onwards. These ladies happen to be the relatives or wives of brokers, therefore, these ladies appear to be just name lenders. In one case of Sh. Deepak Kumar Agarwal relating to A.Y. 2007-08, he has declared in his submission that he has confectionary business. If it has been claimed that such person has provided services relating to confectionary business, it seemed a natural corollary but to claim that such person has provided services in Iron bar selling, it becomes difficult to accept. 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 accounting year. Normal practice of the business requires a bill to be raised as and when it becomes due. Raising of bills by almost all the brokers on the last day or last month of the accounting year gives the impression that the bills were issued at the insistence of the assessee as per its requirement to make adjustment in the P L account to bring down the profit to the desired level of the assessee. It is surprising to note that these so called brokers provide service in a year and silently wait for next 6 months or more to receive payment against the service provided. No prudent person would like to do a job and demand remuneration against it after months or a year. It is also observed that commission has been paid to some ladies also. These ladies happen to be the relatives or wives of broker, therefore, these ladies appear to be just name lenders. In one case of Sh. Deepak Kumar Agarwal relating to A.Y. 2007-08, he has declared in his submission that he has confectionery business. If it has been claimed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses and one bill raised at the fag end of the year for commission. Facts in the cases mentioned above are very much similar to the facts of the case under consideration as discussed above, to disallow commission paid on sales. The Assessing Officer concluded that no services had been rendered by the so claimed brokers to warrant any commission. The commission paid claimed by the assessee is not holly and exclusively for the purposes of business. He relied on the decision in the case of Assam Pesticides and Agro Chemicals Vs. CIT 227 ITR 846 for discount and commission paid 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 ₹ 6,57,406/- in A.Y. 2003-04, ₹ 20,57,895/- in A.Y. 2004-05, ₹ 21,86,974/- in A.Y. 2005-06, ₹ 25,78,399/- in A.Y. 2006-07, ₹ 44,69,998 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t should be other way round i.e. suppliers of raw material should be in search of consumer. 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 the payments have been made in the next year. Bills have been raised by all these said brokers mostly on the last day of the accounting year or in the last month of the accounting year. Normal practice of the business requires a bill to be raised as and when it becomes due. It is surprising to notice that these so called brokers provide service in a year and silently wait for next 6 months or more to receive payment against the service provided. No prudent person would like to do a job and demand remuneration against it after 6 months or a year. Some of the brokers namely M/s Naresh Chand Jain (HUF), M/s Punit Jain Sons (HUF) belong to M/s Ashiana Ispat Ltd. group of cases, which is under scrutiny assessment with the undersigned and it has also been manufacturing Kamdhenu brand of iron bars including TMT bars. In such circumstances it would be na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter in detail, he held that brokers, who had duly executed agreement on stamp paper during the year and further brokers who had been continuing from earlier years and having duly executed agreement on stamp paper in other years though in the relevant year, the agreement was on letter head, can be considered to be genuine and had been paid commission for the purpose of affecting the sales. As the facts and circumstances for the years under consideration are also same, in view of the discussion and reasoning given in the above said appeal order, the same finding applies in the present order also. He has given details of brokers, who has executed agreement duly on stamp paper for A.Y. 2003-04 were 11 in numbers, for commission of ₹ 4,57,229/- was paid. Remaining brokers were held non-genuine considering that though they do not have agreement on stamp paper during the year but certainly in other years, they had agreement duly on stamp paper and moreover they have been working as brokers for the appellant for last 4-5 years or even more. List of these brokers is given in the aforesaid appeal order at para 8.5. In A.Y. 2003-04, two brokers namely M/s Ajay Traders and Sh. Vikrant Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commission of ₹ 7,61,774/- had been paid. Though agreement with other 8 parties out of remaining 26 parties was only on letterhead of the appellant company during the year but as seen in A.Y. 2009-10 wherein there were two parties namely Sh. Jagdish Manchanda and M/s Ajay Traders, who had been continuously working for last so many years. There were six more parties namely Sh. Gulshan Gupta, Sh. Dharmpal Khera, M/s Garg Steel, Sh. Maman Chand Gupta, Sh. Sanjay Gupta and Sh. Vikrant Mahajan, who had worked continuously for many years and entered into agreement duly on stamp paper for at least 3 years (except in case of M/s Garg Steel who has been with the company as sales broker for A.Y. 2007-08, 2008-09 and A.Y. 2009-10, wherein stamp paper agreement is in two years). On the basis of findings given in A.Y. 2009-10, he inferred that these 8 parties with whom appellant had got duly executed agreement on stamp paper in other years, have been continuously working as sales broker during the year also. Total commission amount paid to these 8 parties during A.Y. 2007-08 comes to ₹ 12,86,150/-. The learned CIT(A) had given a chart on page NO. 47 of his order of 13 parties, who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was in case of 28 brokers. The total commission amount paid to these 28 brokers was amounting to ₹ 84,24,284/- which he has considered allowable as per finding given for A.Y. 2009-10 in respect of commission on sale of steel product, instead of entire amount treated to be allowable by the present A.O. in the remand report in all the years. He gave details of commission paid and agreement on stamp paper on page 45 of his order. Besides above, as discussed in A.Y. 2009-10, some brokers have been working for the appellant company for last 4-5 years and even more and the appellant has duly executed agreement on stamp paper with them mainly in initial years and since business relationship continued with the confidence and trust, in some years the agreement on stamp paper was dispensed with but in any case these parties cannot be considered as nongenuine and they have rendered services. Such brokers are Sh. Jagdish Manchanda and M/s Ajay Traders and commission paid to them is ₹ 4,32,398 + ₹ 26,496, in total ₹ 4,58,894/-. He further observed that total commission which can be treated as not non-genuine and thus allowable comes to ₹ 88,83,178/- (Rs. 84,24,284 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings to support the issue that these parties have really got experience and expertise and moreover, have really contacts with suppliers of ingots so as to enable purchase of ingots by the appellant company at competitive rates. Moreover, at least in respect of 5 parties even no formal agreement on stamp paper was found executed. Further even there is no formal agreement on letter head. The learned CIT(A) disagreed with the comments sent by the learned A.O. in the remand report for allowability of commission related to purchases, thus he confirmed commission on purchase of 11 parties at ₹ 31,66,539/-. The learned CIT(A), thus allowed commission on purchase in case of M/s Prem Steel Pvt. Ltd., M/s Doaba Rolling Mills Pvt. Ltd and M/s Shri Ram Mettalloys Pvt. Ltd. totaling to ₹ 3,52,15,320/-. Remaining addition as mentioned above ₹ 66,79,862/- (35,13,323+31,66,539) has been confirmed. 3.7 In A.Y. 2009-10, the learned Assessing Officer disallowed commission on sale at ₹ 1,67,08,266/- out of which, the learned CIT(A) allowed the commission as genuine at ₹ 1,63,20,815/-. The total commission includes commission on sale of steel at ₹ 67,58,832 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment with the parties were not on the stamp paper or in some cases payment was made without being agreement in writing. The learned CIT(A) allowed the claim of commission for such parties, one agreement was on stamp paper in the year under consideration or in any earlier years. It is further argued that in absence of any contrary material against evidence produced by the assessee by way of confirmations of commission paid to various parties was allowable U/s 37(1) of the Act as an expenditure was incurred wholly and exclusively for the business purposes. He relied on the decision in the case of Skylark Chit Fund Financiers (P) Ltd. Vs. CIT (1996) 56 TTJ (Del Trib) 669. The recipient had categorically stated that it had received payment of commission for which the assessee relied upon the decision in case of Supreme Royans (P) Ltd. Vs. Dy.CIT (2006) 104 TTJ 896 (Jod-Trib). He further relied on the following case laws:- (i) Dharamvir Dhir Vs. CIT (1961) 42 ITR 7 (SC). (ii) Calcutta Landing Shipping Co. Ltd. Vs. CIT (1967) 65 ITR 1 (Cal). (iii) CIT Vs. Panipat Woollen General Mills Co. Ltd. (1976) 103 ITR 66 (SC). (iv) CEPT Vs. N.M. Rayaloo Iyer Sons (1961) 41 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that in the line of business, mostly goods is being sold through brokers on which commission is paid. Purchase also made through brokers, therefore, it requires to pay commission to the middle man who make available of goods from the market. The assessee has submitted confirmations, PAN number, copy of return in some case copy of bank account with confirmations. On verification of confirmations, in all the cases TDS has been deducted by the assessee on commission. The learned CIT(A) specifically mentioned commission paid to M/s SKT on purchase, who is dealing in Tissue paper, craft paper, card board and other types of boards etc., in A.Y. 2008-09. The AR submitted that details of commission paid to it on purchases made by the assessee alongwith copy of bills, confirmations and bank statements of assessee company evidencing the payment of commission has been filed before the learned CIT(A). He particularly drew our attention on page 137 to 151 of the paper book for A.Y. 2008-09, which is copy of confirmation with PAN number, copy of bank account of the assessee company, which shows that the commission payment was made through banking channel. It also filed copy of agreement dat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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