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TMI Blog2017 (1) TMI 1334X X X X Extracts X X X X X X X X Extracts X X X X ..... SH BORAD, ACCOUNTANT MEMBER For The Assessee : Shri S. N. Divatia, A.R. For The Revenue : Shri P. S. Chaudhary, Sr. D.R. ORDER PER S. S. GODARA, JUDICIAL MEMBER This batch of four appeals pertain to two different assessees M/s. Asha Industries (India), Nadiad M/s. Tona Tab Agency, Ahmedabad. Former assessee has filed its three appeals for assessment years 1990-91 to 1992-93 against CIT(A)-IV, Baroda s separate orders; all dated 25.03.2014 in appeal nos. CAB/IV-707/2009-10, CAB/IV-708/2009-10 CAB/IV-709/2009-10, confirming Assessing Officer s action disallowing commission payments made to the latter assessee of ₹ 5,45,773/-, 6,96,813/- 7,63,713/-; respectively, in proceedings u/s. 143(3) r.w.s. 147 r.w.s. 254 of the Income Tax Act, 1961; in short the Act . Latter assessee M/s. Tona Tab Agency has filed its appeal in assessment year 1993-94 against CIT(A) s Gandhinagar order dated 31.08.2015 in appeal no. CIT(A)/GNR/4/2009-10, affirming Assessing Officer s finding holding it as not to have performed any agency services to the former assessee thereby concluding it as a non genuine firm resulting in disallowance of expenses in the nature of sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing the above commission expenses claimed as business expenditure. This issue travelled upto the tribunal in ITA Nos. 3991, 4503 and 4504/Ahd/1996 wherein a co-ordinate bench restored the issue back to the lower appellate authority. The CIT(A) thereafter upholds the impugned disallowance/addition of commission expenses paid to latter assessee M/s. Tona Tab Agency as under: 4.2 I have considered the appellant's submission and the AO's observations. In this case, the AO of M/s Tona Tab Agencies has conducted several enquiries in relation to receipt of commission by this person from the appellant. The relevant parts, findings and observations are reproduced on pages 2 to 6 of the assessment order in the case of appellant. A perusal of such observations shows that though the office of M/s. Tona Tab Agencies was in Ahmedabad, it was confirmed by the partners of the firm occupying the space at which Tona Tab Agencies was having the registered office, that infact the entire business affairs of M/s. Tona Tab Agencies were being conducted from the office situated in Nadiad for last so many years. From the statement recorded of one of the partners of M/s. Tona Tab Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence cannot write any letter to it. It was also stated that as per agreement M/s. Asha Industries has to pay over riding commission @ 10% on net sale proceedings affected to the Tona Tab Agencies. Finally AO of the Tona Tab Agencies held as follows:- Para 7 The assessee and M/s. Asha Industries have never given details regarding services rendered by M/s Tonatab Agency for which the commission at the rate of 10% is paid. It may be brought on record that there are two partners in the firm of M/s Asha Industries and their relationship is father and daughter. Shri Indubhai M Patel who is partner in his individual capacity in M/s Asha Industries is also partner in HUF capacity in the firm of M/s Tona Tab Agencies. Thus, the entire business affairs of M/s Asha Industries and M/s Tonatab Agencies is controlled and conducted by Shri. Indubhai M. Patel. During the course of scrutiny of Profit Loss A/c it was noticed that the assessee has claimed Advertisement expenses of ₹ 2,65,313/-. On further, inquiry, it was found that major portion of the advertisement expenses was paid to painters and Artists situated at Nadiad (Painter Ramesh Rao, Samir Art etc.) The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... howing month-wise details of sales commissions A.Y. 1991-92 booked as the percentage of sales and providing copying of credit notes issued by the appellant, no details of specific services rendered by M/s Tona Tab Agencies to the appellant firm for which the commission was being paid by the appellant has been provided, despite the fact that both the firms are having common partners and hence are related concerns. Hence such commission payment is not allowable as a deduction in computation of the appellant's income. This backdrop of facts leaves the former assessee aggrieved. It has thus filed its three appeals for assessment years 1990-91 to 1992-93. 4. We now advert to latter assessee M/s. Tona Tab Agency s appeal for assessment year 1993-94 seeking to reverse the CIT(A) s finding under challenge upholding the Assessing Officer s action concluding it as a non genuine firm and making protective assessment in its case qua disallowances of salary, travelling expenses and advertisement related expenses narrated hereinabove. Suffice to say, the tribunal has remitted this issue as well back to the Assessing Officer in ITA No.1975/Ahd/2000 for de novo assessment. The Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue was set-aside to the file of the AO and AO has passed an order on the directions of Hon'ble ITAT, made the disallowance of entire expenses claimed by the appellant firm against the Commission received from M/s Asha Industries and made the assessment on PROTECTIVE BASIS. AO had made the protective assessment on the basis of facts mentioned in the copy of agreement entered into between Asha Industries and the appellant dated 15/02/1973 and on the amended agreement dated 01/11/1973 on a simple letter head. In this agreement it was mentioned that M/s Tona Tab Agency will not be paid any commission on direct sales by VIP, local sales at Nadiad and on export sales. After considering the facts of the case and the agreement and amended agreement, AO Officer has finalized the assessment on protective basis. The AR of the appellant Shri Sunil Talati, CA attended the appellate proceedings from time to time and he was; asked regarding the status of appeals of Asha Industries filed with CIT(A)-4, Baroda/ Shri Talati vide letter dated 13/3/2015 stated that cases were pending before the CIT(A)-4, Baroda and therefore, the present appeal could not be taken up for disposa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s common order in M/s. Tona Tab Agencies case for assessment year 1990-91 to 1992-93 substantively assessing the amounts received from M/s. Asha Industries as its income to be substantively assessed reading as under: 8. We have careful consideration to the rival contentions. The finding of fact recorded by the CIT(A) that neither there is any disallowance of commission in the case of M/s Asha Industries nor has the income of the assessee been clubbed with the income of M/s Asha Industries, has not been rebutted before us by an evidence. Therefore, the controversy in this case as to whether income should be assessed on protective basis or not, is consequential. Once no assessment has been made, on substantive basis, in any other case, of the income assessed in this case on protective basis, the protective assessment is rendered as substantive assessment automatically. In the light of these facts, it is unnecessary for us to go into the findings of the CIT(A) as well as that of the AO and record a finding about benami character of the assessee firm. We would however like to mention that mere fact that the firm has been granted registration, does not bind the AO to assessee the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly uphold CIT(A) s well reasoned orders forming subject matter of first three appeals. We thus reject former assessee s appeals ITA Nos. 2392 to 2394/Ahd./2015 in all three assessment years challenging correctness of marketing commission expenditure disallowances stated hereinabove. 10. We now advert to latter assessee s appeal ITA No.3255/Ahd/2015 for assessment year 1993-94 challenging the CIT(A) s order affirming Assessing Officer s finding holding it as a non genuine firm thereby finalizing protective assessment as well as disallowance the above salary, travelling and advertisement expenses stated hereinabove. Both the learned representatives express agreement that the main issue herein is that this assessee allegedly claim to have received commission income from the former assessee and also incurred the above three heads of expenses. We rely on our findings in preceding paragraph in said former assessee s case to conclude that this appellant/latter assessee has failed to prove itself as a genuine firm so as to prove its claim of having rendered marketing services in question. We reiterate that our narration of facts in preceding paragraphs has sufficiently highlighted a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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