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TMI Blog2022 (2) TMI 1455X X X X Extracts X X X X X X X X Extracts X X X X ..... enses - payee is resident of UAE and has no permanent establishment in India and payment was not made on behalf of assesse - Terms and conditions, which are not controverted by the Revenue, clearly demonstrate that the foreign-buyer has directly paid commission to Mr. Ashik Asaria[Payee], out of the sale proceed belonging to the assessee. Therefore, the Ground No. 1.1, which is a part of Ground No. 1, does not have any substance. No infirmity in the order of Ld. CIT(A). Therefore we hold that the Ld. CIT(A) was justified in deleting the disallowance. Addition u/s 68 on account of increase in share capital - AO required the assessee to submit evidences in support of the receipt of but the assessee did not submit - CIT(A) deleted addition - HELD THAT:- assessee has submitted additional evidences in the form of (i) list of the persons from whom the moneys were received, their PANs, copies of their ITRs and proofs of their sources of income, wherever available, and (ii) copy of Form-2 being Return of Allotment of shares as per Companies Act, and (iii) details of bank accounts alongwith cheques through which the moneys were received, to the Ld. CIT(A) and those evidences stand admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of Ld. CIT(A), the Revenue has preferred this appeal and now before us. 4. Ground No. 3: 4.1 In this Ground, the Revenue has urged to decide whether the Ld. CIT(A) was justified in admitting the additional evidences in violation of Rule 46A of Income-tax Rules, 1962. As this Ground goes to the root of the matter, we firstly take up this and thereafter other Grounds which are on merit. 4.2 During the proceeding of first-appeal, the assessee filed an application to Ld. CIT(A) alongwith additional evidences under Rule 46A of Income-tax Rules, 1962. The assessee submitted that there was a fire in its factory as a result of which the documents were lost/damaged, stock was damaged, financial crisis occurred, the business had to be closed and there were total disruptions due to which the assessee could not file evidences before the Ld. AO during assessment-proceeding. Citing these reasons, the assessee prayed the Ld. CIT(A) to admit its application for additional evidences under Rule 46A. 4.3 The Ld. CIT(A) forwarded assessee s application alongwith all accompanying evidences to Ld. AO vide his letter F.No. CIT(A)- I/Ind/Remand-Report/2017-18 dated 11.01.218 for comments and Remand- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing heard, but assessee failed to make any compliance. However, in the assessment, the additions have been made on assessee s failure to furnish documents required to justify its claim. It is claimed that due to above mentioned hardship, the assessee could not produce supporting documents and the assessee s claim is that it was prevented by sufficient cause in not submitting the above papers at the time of assessment, which are relevant for the purpose of assessment, the same may please be considered at appellate stage by your honour, if deem fit. A careful reading of this demonstrates that the Ld. AO has neither uttered any objection against the assessee s application for additional evidences nor found any kind of deficiency in the same. In fact, the Ld. AO has holistically considered the inability of the assessee to submit the documents during the assessment- proceeding and left the matter to the wisdom of the Ld. CIT(A) by stating the same may be considered at appellate stage by your honour, if deem fit . We have also considered Para No. 4 of the order of Ld. CIT(A) reproduced above and observe that the Ld. CIT(A) has considered the outbreak of fire and consequential disruption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the claim is not allowed and hence it is added back to the total income of the assessee. 5.3 The Ld. CIT(A) has, however, deleted the disallowance vide Para No. 5.2 by observing as under: 5.2 Ground No.2: Through this ground of appeal, the appellant has challenged the addition of Rs. 1,71,32,125/- on account of commission expenses. During the year under consideration the appellant has paid the commission of Rs. 1,71,32,125/- as against Rs. 61,96,000/- paid in the previous year. The sales commission was paid to Mr. Aashik Asaria, Resident of UAE. The sale was made to M/s Overseas Metal Trading Co., UAE. The appellant furnished the copy of agreement dated 01/10/2008 with the sales agent. The AO made the addition on the ground that appellant has not deducted the TDS on the commission paid. The appellant stated that the commission has been paid to the non-resident and provision of section 40(a)(i) of The Act is not applicable. 5.2.1 The appellant company is carrying business of manufacturing and trading of aluminum extrusion. The appellant company also engaged in the export. The payment of commission is worked out as per the agreement executed with Mr. Aashik Asaria, resident of UAE. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with any country will always prevail over the Income Tax Act. 1. Union of India vs.Azadi Bachao Andolan {2003} 132 Taxman 373 (SC). 2. Director of Income Tax vs. New Skies Satellite BV. {2016} 68 taxmann.com 8 (Delhi). 5.2.5 Therefore, the addition made by the AO amounting to Rs.1,71,32,125/- is Deleted. Therefore, the appeal on these grounds is Allowed. 5.4 Before us, the Ld. D/R relied upon the order of Ld. AO and argued that the disallowance was rightly made, which needs to be upheld. 5.5 Per contra, the Ld. A/R has submitted that the assessee has paid commission of Rs. 171.32 lacs as against Rs. 61.91 lacs in the immediately preceding year. According to Ld. A/R, the mention of Rs. 14.26 lacs by Ld. AO as commission-payment in the immediately preceding year is incorrect, the correct amount being Rs. 61.91 lacs. The Ld. A/R submits that having regard to the correct figures of commission-payment and the quantum of export- sales of both years, the payment made by the assessee is quite comparable and reasonable looking to the prevailing market. Regarding non-submission of evidences during assessment- proceeding, the Ld. A/R submitted that there existed sufficient cause which preven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax at source u/s 195 by the assessee, we observe that it is a well-settled law that the requirement of TDS u/s 195 arises only if the relevant sum is chargeable to tax in India. If the sum is not chargeable to tax in India, there is no requirement of TDS at all and this proposition is also supported by the decisions quoted by Ld. A/R mentioned earlier. 5.7 At this stage we also take note of the Ground No. 1.1 wherein the Revenue has claimed that the Ld. CIT(A) has erred in holding Mr. Aashik Asaria as a resident of UAE having no permanent establishment in India and that the payment was made on behalf of assessee, without any verification of the claim by any enquiry or remand report. In this regard, we observe from the copy of agreement placed at Page No. 52 of the Paper-Book that Mr. Ashiq Asaria is having address of P.O. Box No. 29421, Sharjah, UAE, which indicates that he is a non-resident. Regarding payment of commission on behalf of assessee, we peruse the condition No. 8 of this Agreement which reads as under: Agent will be entitled to receive commission as and when sales proceeds has been received from buyer. Principal can authorize agent to collect his commission from bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As such the investment in shares to the extent of Rs. 75,00,000/- is treated as unexplained investment of the assessee company and as such the same is charged to income tax for the year under consideration u/s 68 of the I.T Act,1961. 6.3 The Ld. CIT(A) has, however, deleted this addition vide Para No. 5.1 by observing as under: 5.1 Ground No.1: Through this ground of appeal, the appellant has challenged the addition of Rs. 75,00,000/- on account of increase in Share Capital. The appellant has received share capital of Rs. 75,00,000/- from the following persons:- S.No. Name of the Persons Share Capital (Rs.) 1 Shri Aabhash Maheshwari S/o Shri Ramesh Mungad 4,00,000/- 2 Shri Gaurav Mungad S/o Shri Om Prakash Maheshwari 9,50,000/- 3 Smt. Madhu Maheshwari W/o Shri S.N. Maheshwari 50,000/- 4 Shri Om Prakash Maheshwari S/o Shri Chhaganlal Maheshwari 2,00,000/- 5 Smt. Sushila Mungad W/o Shri O.P. Maheshwari 50,000/- 6 Shri Vaibhav Mungad S/o Shri Om Prakash Maheshwari 58,50,000/- The company has received share capital from its directors and family members. The appellant has received the money from the person by cheque and all the depositors are having PAN Number. The lender parties furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made. 5.1.2 Therefore, the AO is not justified in making the addition. Therefore, the addition made by the AO amounting to Rs. 75,00,000/- is Deleted. Therefore this ground of appeal on this ground is Allowed. 6.4 Before us, the Ld. D/R relied upon the order of Ld. AO and argued that the addition was rightly made, which needs to be upheld. 6.5 Per contra, the Ld. A/R submitted that the Ld. AO has invoked section 68 of the Act and thereby made addition of Rs. 75,00,000/- for the sole reason that the assessee could not submit the details and evidences required by Ld. AO during assessment-proceeding. But subsequently during appellate proceedings, the assessee submitted all evidences to Ld. CIT(A) in terms of Rule 46A(1)(b). The Ld. A/R further submitted that the evidences filed to Ld. CIT(A) in this regard were (i) list of the persons from whom the moneys were received, their PANs, copies of their ITRs and proofs of their sources of income, wherever available, and (ii) copy of Form-2 being Return of Allotment of shares as per Companies Act, and (iii) details of bank accounts alongwith cheques through which the moneys were received. The Ld. A/R also invited our attention to Page No. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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