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TMI Blog2015 (6) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... s, produced before the Assessing Officer. In view of these discussions uphold the well reasoned and well considered action of the CIT(A) and decline to interfere in the matter. - Decided against revenue. Addition of commission expenses - CIT(A) deleted the addition - Held that:- The elaborate reasoning for the relief so granted by the CIT(A) is quite valid and judicious. The additional evidences in support of these expenses were duly sent to the AO as well and his comments thereon are duly considered. The relief granted by the learned CIT(A) is in accordance with the accepted past history of the case and even the quantum of expenditure is lesser than similar expenditure incurred by the assessee in preceding assessment years. As regards the question of non deduction of tax at source from these payments, as noticed, from the details of payments furnished before me, none of these payments is in excess of the threshold limit resulting in TDS obligations. In view of these discussions, as also bearing in mind entirety of the case, approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.- Decided against revenue. Addition of office expenses - CIT(A) d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the assessee is indeed correct. All along the disallowance has been restricted to l/10th of these expenses and there is no reason to deviate from that aspect of the accepted past history. Therefore, direct the AO to restrict the disallowance to l/10th of these expenses. - IT Appeal Nos. 2 & 60 of 2015 & Co Nos. 3 & 4 (Agra) of 2015 - - - Dated:- 31-3-2015 - Pramod Kumar, J. Surendra Kumar for the Appellant P.K. Sehgal and Utsav Sehgal for the Respondent ORDER 1. These two appeals, and the two cross objections arising from the appeals, pertain to the same assessee, involve interconnected issues and were heard together. As a matter of convenience, therefore, I am disposing of both the appeal as also both the cross objections by way of this common order 2. When these appeals and the cross objections were taken up, I noticed that while the assessee's assessed income is only ₹ 4,83,017, and thus well under ₹ 5,00,000 threshold limit of assessed income as specified in section 255(3) of the Income Tax Act, 1961, the dispute involved in these appeals and the cross objections involves much higher amounts, in excess of that limit, as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. Learned counsel also invited my attention to a judgment of Hon'ble Karnataka High Court, in the case of C1T v. Mahakuteshwar Oil Industries [2008] 298 ITR 390, wherein it was held that even in a situation in which the CIT(A) had enhanced income of the assessee, so far as jurisdiction of SMC bench is concerned, all that is relevant is the income assessed by the Assessing Officer. It is thus submitted that the only test for deciding whether an appeal can be heard by a single member bench is the income assessed by the Assessing Officer, and nothing more. He submits that such being the legal position, it is really irrelevant as to what is the quantum of tax dispute involved in the appeal. When the provisions of law are unambiguous, according to Shri Sehgal, there is no scope of resorting to any creative process of interpretation and referring to the call of propriety. He submits that in the normal circumstances, it is immaterial whether an appeal is heard by the SMC bench or by the division bench, but, since the division bench is non-functional in Agra, referring these appeals to division bench will result in wholly avoidable delay in disposal of appeals. Shri Sehgal then submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions contained in sub-s. (3), Bench shall consist of one JM and one AM. (3) The President or any other Member of the Tribunal authorised in this behalf by the Central Government may, sitting singly, dispose of any case which has been allotted to the Bench of which he is a Member and which pertains to an assessee whose total income as computed by AO in the case does not exceed five hundred thousand rupees and the President may, for the disposal of any particular case constitute a Special Bench consisting of three or more Members, one of whom shall necessarily be a JM and one an AM. 11. In sub-s. (3) of s. 255, the word used is total income as computed by the AO in the case does not exceed five hundred thousand rupees. By considering the word AO, we have to consider whether the order passed by the CIT(A) has to be construed as an order passed by AO or by an appellate authority. The word, AO is defined under s. 2(7A) of the IT Act which reads as hereunder: ' AO means the Asstt. CIT or Dy. CIT or Asstt. Director or Dy. Director or the ITO who is vested with the relevant jurisdiction by virtue of the directions or orders issued under sub-s. (1) or sub-s. (2) of s. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions. Rejecting the plea of the assessee, a division bench of this Tribunal, inter alia, observed as follows: '6. It may be noted here that the criterion adopted for determining the jurisdiction of the Single Member Bench is not the quantum of addition but the quantum of income. There may, for example, be cases where the loss return of more than ₹ 50 lacs may be converted to a positive figure of ₹ 1,000. The jurisdiction in such a case will not be of the Division Bench because the addition of ₹ 50,01,000 has been made but of the SMC because the total income assessed is ₹ 1,000.... If the addition had been ₹ 92,46,300 the resultant figure will be total income of ₹ 10. jurisdiction in such case will definitely be of SMC. It is, therefore, futile, in the existing state of law, to look at the quantum of addition. What has to be looked at is the quantum of total income.' 7. I have noted that Section 255(3) specifically provides that, The President or any other member of the Appellate Tribunal authorised in this behalf by the Central Government may, sitting singly, dispose of any case which has been allotted to the Bench of which he is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s inherent in a division bench. However, as the law stands its assessed income which matters and not the tax effect or the quantum of disallowances or additions impugned in appeal. All that is relevant to decide the jurisdiction of the SMC bench is thus the assessed income and nothing other than that. 8. It is in this backdrop that I proceed to take up the appeals and cross objections even though while the assessed income in the related does not exceed ₹ 5,00,000, the additions or disallowances impugned in the matter are far in excess of ₹ 5,00,000. 9. I will first take up the ITA No. 2/Agra/2015. 10. This appeal, filed by the Assessing Officer, is directed against the order dated 9th April 2014 passed by the CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961 for the assessment year 2003-04. 11. In the first ground of appeal, the Assessing Officer has raised a grievance against admission of additional evidence by the CIT(A) in violation of rule 46A, without appreciating the fact that ample opportunity was provided to the assessee to produce the books of account and supporting bills and vouchers, which he failed to avail . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that as ;- (a) The assessee was prevented by sufficient cause from producing the evidences which it was called upon to produce by the AO; (b) The assessee was prevented by sufficient cause from producing before the AO, evidences which are relevant to the grounds of appeal before your Honour' and (c) The assessee was not allowed sufficient opportunity to adduce Income Tax Rules, 1962, your Honour kindly admit the documents, material, evidences filed at pages 110-127 in the paper compilation (which as stated above were filed on 22nd March, 2006 through Dak Counter before the learned AO), so as to enable the assessee firm to defend its case properly judiciously. 13. This petition under rule 46A was opposed by the Assessing Officer and, in the remand report submitted on this petition, the Assessing Officer contended that since reasonable opportunity of hearing was granted to the assessee during the course of assessment proceedings, no additional evidence should be submitted at this stage. In response to this remand report, assessee again pointed out that it was due to severe and fatal illness of the managing partner that the assessee was prevented from complying t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tentions and having perused the material on record, I am not persuaded to uphold the grievance of the Assessing Officer. I have noted that managing partner of the firm, who was handling accounting and taxation matters of the firm right from its inception, was seriously ill, and eventually passed away due to illness, and that itself a valid reason for not being able to furnish the necessary details at the assessment stage. In any event, it is a matter of record that the assessee had furnished the requisite details and evidences at the dak counter on 22nd March 2006 which were not taken into account even though the assessment order was served on the assessee on 24th March 2006. 1 have also noticed that the remand report on all these additional evidences and submissions was duly called from the Assessing Officer and taken into account in deciding the matter on merits. A view may indeed be taken, as taken by Hon'ble Gujarat High Court in the case of CIT v. Volimohemed Ahmedbhai [1982] 134 ITR 214, that the CIT(A) cannot admit any additional evidence placed under r. 46A(1) unless the ITO has been allowed a reasonable opportunity to examine the evidence, but it is not necessary to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an that if facts of a case warrant that, before disposal of any appeal, CIT(A) is required to make further inquiries, either on his own or through the AO, he is not denuded of the powers to do so because of the provisions of r.46A. On a consideration of facts of this case, and in the peculiar facts of this case, in my view, the CIT (A) ought to have admitted the additional evidence which could not be, for genuine reasons, produced before the Assessing Officer. In view of these discussions and bearing in mind entirety of the case, I uphold the well reasoned and well considered action of the CIT(A) and decline to interfere in the matter. 16. Ground no. 1 is thus dismissed. 17. In ground no. 2, the Assessing Officer is aggrieved of the learned CIT(A) deleting the addition of ₹ 7,77,482 in respect of commission expenses. Grievance of the AO is that the assessee had not produced bills and vouchers for these expenses at the assessment stage, had not given complete details in respect of the same and did not even deduct tax at source in respect of the same. Yet, the CIT(A) has deleted the disallowance aggrieved by which the AO is appeal before me. 18. So far as this disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been made by the AO after taking into account the decision of the Hon'ble ITAT, Agra and this addition has been confirmed by me vide my appeal order A. No. 421/ClT(A)-II/Agra/ACIT-4(l)/Agra/07-08/876, dated 30.08.2013. After considering the nature of the business of the assessee in the light of the facts that payment of commission in this type of business is integral part of the business of the assessee, I am of the view that payment of commission as claimed by the assessee (appellant) cannot be totally ruled out, however, it is also correct that the verification of the entire amount of commission claimed by the assessee is not possible. However, despite such commission not being completely verifiable, the Hon'ble ITAT Agra while deciding the appeal in assessee's own case for earlier assessment years allowed the payment of commission for most of the years except for AY 1996-97 and AY 2001-02 as discussed above. Therefore, in this year also, I have considered the allowability of commission in the light of above decisions after examining the documents produced before me and reply filed by the Ld. AR as discussed above. During the course of the verification of docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed before me, none of these payments is in excess of the threshold limit resulting in TDS obligations. In view of these discussions, as also bearing in mind entirety of the case, I approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. 22. Ground no. 2 is thus dismissed. 23. In ground no. 3, the Assessing Officer is aggrieved that the CIT(A) erred in law and on facts in deleting the addition of ₹ 3,74,590 in respect of office expenses. Grievance of the AO is that the assessee had not produced bills and vouchers for these expenses at the assessment stage, had not given complete details in respect of the same whereas the onus was on the assessee to establish the fact and bona fides of this expenditure. 24. The disallowance was made by the AO, on purely estimated basis, as the evidences in support of the expenses were not produced during the course of the assessment proceedings. However, as we have noted earlier in this order, subsequently assessee submitted all the necessary evidences by way of additional evidence under rule 46 A, on which remand report was also called from the AO. It was in this backdrop and satisfied with the materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided the losses of these two branches as not genuine. However, as these two branches were running in Hotel Ram Bagh Palace, Jaipur Hotel Maurya Sheraton, Delhi, the loss suffered by the assessee (appellant) from these two branches cannot be denied. He also showed to me that the details of sales and purchases of these two branches were also filed along with the letter date 20.03.2006 and the same were also produced before me. After verification of these details and looking to the fact that the assessee (appellant) was maintaining regular books of account including the books for these two branches and all the details of purchase and sales are available, loss shown by the assessee (appellant) from these two branches cannot be denied and the same cannot be disallowed in absence of any evidence to shown the losses incurred by the assessee (appellant) from these two branches were not genuine or the documents/books maintained by the assessee (appellant) are not reliable. However, since the AO has not brought any such evidence on record except disallowing the losses in absence of verification, the same cannot be disallowed after it has been shown that the proper details of sales and pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34.1 Ground no. 5 is also dismissed. 34.2 In the result, ITA No. 2/Agra/2015 is dismissed. 34.3 In ITA No. 60/Agra/2015, the Assessing Officer has challenged correctness of the order dated 15.12.2004 passed by the CIT(A), rectifying his appellate order and disposing of a ground of appeal which was inadvertently left out earlier, in the matter of assessment under section 143(3) of the Act for the assessment year 2003-04. 34.4 Grievance of the AO is that the CIT(A) erred in deleting the addition of Rs l,15,220 in respect of disallowance of expenses of Pleasure Tours, Agra branch. 35. So far as this disallowance is concerned, it was made on ad hoc basis in the course of the assessment proceedings, on the ground that the assessee had not given complete details and supporting evidences. In appeal, all these evidences and details were furnished by way of additional evidences, the AO was also heard in respect of the same, and then the disallowance was deleted. The AO, however, is not satisfied and is in appeal before me. 36. Having heard the rival contentions and having perused the material on record, I am not inclined to disturb the very well reasoned findings and conclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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