THE ITO 3(1)(1), MUMBAI v. M/S. ARIHANT TOURNESOL LTD, MUMBAI

ITA 5740/MUM/2008 | 2005-2006
Pronouncement Date: 24-02-2010 | Result: Dismissed

Appeal Details

RSA Number 574019914 RSA 2008
Assessee PAN AAACA3322J
Bench Mumbai
Appeal Number ITA 5740/MUM/2008
Duration Of Justice 1 year(s) 5 month(s) 12 day(s)
Appellant THE ITO 3(1)(1), MUMBAI
Respondent M/S. ARIHANT TOURNESOL LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 24-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 24-02-2010
Date Of Final Hearing 16-02-2010
Next Hearing Date 16-02-2010
Assessment Year 2005-2006
Appeal Filed On 11-09-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI. BEFORE SHRI R.K. GUPTA J.M. AND SHRI J. SUDHAKAR REDDY A.M. I.T.A. NO. 57 40/MUM/2008 ASSESSMENT YEAR : 2005-06 THE INCOME-TAX OFFICER M/S A RIHANT TOURNESOL LTD. RG. 3(1)(1) MUMBAI. VS. 34/B JOLLY MAKER NARIMAN POINT MUMBAI-400 020. PAN AAACA3322J. APPELLANT RESPONDENT APPELLANT BY : MS. MAHAU SARKAR. RESPONDENT BY : SHRI VIJAY KOTHARI. O R D E R PER J. SUDHAKAR REDDY A.M. THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED A GAINST THE ORDER OF THE CIT(APPEALS)-XXVII MUMBAI DATED 30-06 -2008 FOR ASSESSMENT YEAR 2005-06 ON THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) ERRED IN TREATING THE RECEIPTS OF RS.99 02 8 88/- AS BUSINESS RECEIPTS AS AGAINST THE SAME TREATED AS INCOME FROM OTHER SOURCES BY THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACT S THAT THE RECEIPTS RECEIVED WERE NOT IN EXERCISE OF BUSINESS IN ABSENC E OF ANY EVIDENCE OF RENDERING SERVICES AND HENCE THE SAID RECEIPTS I S INCOME FROM OTHER SOURCES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) ERRED IN ADMITTING NEW EVIDENCE IN CONTRAVEN TION OF PROVISIONS OF RULE 46A BY ADMITTING THE LETTER FROM M/S PANTALOON RETAIL (INDIA) STATING THE LOAN WAS DISBURSED BY ST ATE BANK OF INDIA HYDERABAD BRANCH WHERE AS THE ASSESSEE HAD SUBMITTE D LETTER BEFORE THE ASSESSING OFFICER THAT THE LOAN WAS DISBURSED B Y STATE BANK OF INDIA NARIMAN POINT BRANCH. 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) ERRED IN STATING THAT THE DECISION OF MCDOWE LL & CO VS CIT REPORTED IN 154 ITR 148 IS NOT APPLICABLE TO THE CA SE OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) ERRED IN LAW IN DELETING THE ADDITIONS OF TH E RECEIPTS OF RS.99 02 888/- AS INCOME FROM UNDISCLOSED SOURCES. 2. FACTS IN BRIEF : THE ASSESSEE IN THIS CASE WAS ORIGINALLY ENGAGED IN THE BUSINESS OF OIL AND CHEMICALS. IT IS ALSO ENGAGED I N THE BUSINESS OF PROVIDING SERVICES FOR WHICH IT USED TO EARN COMMIS SION FEES. DURING THE YEAR THE ASSESSEE RECEIVED COMMISSION FROM M/S MOHI NI ORGANICS PVT. LTD. (ON SALE OF CHEMICALS) FROM CLASSIC MARBLE AN D M/S EURO CERAMICS PVT. LTD. (ON SALE OF CERAMIC ITEMS LIKE TILES MAR BLES ETC.) AND BROKERAGE INCOME FROM TATA POWER CO. LTD. AND H & R JOHNSON ( I) LTD. (ON LEAVE AND LICENSE AGREEMENT) AND CHARGES FOR ARRANGING TE RM LOAN FROM M/S PANTALOON RETAIL (INDIA) LTD. AND KSM SECURITIES & FINANCE PVT. LTD. THE AO ON THE GROUND THAT NO EVIDENCE WAS SUBMITTED REGARDING THE NATURE OF SERVICES RENDERED BY THE ASSESSEE AND ALS O ON THE GROUND THAT ENQUIRIES WITH IDBI REVEALED THAT THE ASSESSEE HAD NOT RENDERED ANY LIASON WORK FOR SANCTIONING OF LOAN TO M/S PANTALOO N RETAIL (INDIA) LTD. CAME TO A CONCLUSION THAT THE INCOME IN QUESTION IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THE AO HAD ALSO E NQUIRED WITH STATE BANK OF INDIA NARIMAN POINT BRANCH AND THE BANK M ANAGER OF THE BRANCH STATED THAT NO ADVANCE WAS GRANTED BY THE BR ANCH TO M/S PANTALOON RETAIL (INDIA) LTD. LATER THE ASSESSEE CL ARIFIED THAT THE LOAN WAS IN FACT OBTAINED FROM STATE BANK OF HYDERABAD AND N OT STATE BANK OF INDIA AND A CONFIRMATION TO THAT EFFECT IS SOUGHT T O BE FILED. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE FIRS T APPELLATE AUTHORITY OBSERVED THAT SIMILAR INCOME BY WAY OF COMMISSION A ND BROKERAGE HAS 3 BEEN ASSESSED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION IN ORDERS PASSED U/S 143(3) FOR ALL THE EARLIER YEARS. HE ALSO OBSERVED THAT THE PROFITS OF EACH OF THE EARLIER YEARS HAS BEEN SET OFF AGAINST THE BUSINESS LOSSES BROUGHT FORWARD FROM THE EARLIER YEARS. THUS THE FINDING OF THE AO THAT THE ASSESSEE HAD NEVER EARNED COMMISSION OR BR OKERAGE INCOME IN THE EARLIER YEARS WAS FOUND TO BE FACTUALLY INCORRE CT. THE FIRST APPELLATE AUTHORITY FURTHER HELD THAT FROM THE TDS CERTIFICAT ES NATURE OF PAYMENT WAS SHOWN AS BROKERAGE AND COMMISSION AND TAXES WER E DEDUCTED U/S 194H. HE FOUND THAT THE AO MADE ENQUIRIES U/S 133(6 ) OF THE ACT AND HAS NOT FOUND ANYTHING ADVERSE. HE ALSO FOUND THAT IF THE DEBIT NOTES RAISED ON THE COMPANIES IT IS MENTIONED THAT THE INCOME I S FROM COMMISSION AND BROKERAGE. HE HELD THAT THE AO SHOULD HAVE COND UCTED ENQUIRIES WITH THE PAYER COMPANIES AND WITHOUT DOING THE SAME SHO ULD NOT HAVE COME TO A CONCLUSION THAT THE AMOUNT RECEIVED IS NOT TOW ARDS BROKERAGE. HE HELD IN FAVOUR OF THE ASSESSEE. AGGRIEVED THE REVE NUE IS IN APPEAL ON THE GROUNDS MENTIONED ABOVE. 3. WE HAVE HEARD MS. MAHAU SARKAR LEARNED DR ON B EHALF OF THE REVENUE AND MR. VIJAY KOTHARI LEARNED COUNSEL FOR THE ASSESSEE. 4. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIR CUMSTANCES OF THE CASE AND THE PERUSAL OF THE PAPERS ON RECORDS A ND THE ORDERS OF THE AUTHORITIES BELOW WE HOLD AS FOLLOWS. 5. THE SOLE ISSUE THAT ARISES FOR OUR CONSIDERATIO N IS WHETHER THE INCOME OF RS.99 02 888/- IS TO BE ASSESSED UNDER TH E HEAD INCOME FROM OTHER SOURCES OR UNDER THE HEAD INCOME FROM BUSIN ESS OR PROFESSION. THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS RECEIV ED VARIOUS AMOUNTS FROM DIFFERENT COMPANIES AT DIFFERENT POINTS OF TIM E IN CONNECTION WITH DIFFERENT TYPES OF BILLS RAISED FOR RENDERING SERVI CES. THE AO DISBELIEVES 4 THE FACT THAT THE ASSESSEE HAD RENDERED SERVICES. T HE PAYERS HAVE PAID THE AMOUNTS AS COMMISSION FOR SERVICES RENDERED AND IT IS SUBMITTED AT THE BAR THAT IN THE HANDS OF ALL THESE PAYERS THE AMOU NTS HAVE BEEN ALLOWED AS GENUINE EXPENDITURE INCURRED TOWARDS COMMISSION FOR SERVICES RENDERED. THE AO HAS NOT BOTHERED TO CONDUCT ENQUIR IES WITH ANY OF THESE ENTITIES WHICH HAVE MADE THESE PAYMENTS. AS RIGHTLY POINTED OUT BY THE FIRST APPELLATE AUTHORITY THE ASSESSEE HAS BEEN CA RRYING ON THE ACTIVITY OF PROVIDING SERVICES SINCE THE LAST NUMBER OF YEARS AND THE SAME WAS ASSESSED AS BUSINESS INCOME. THE COMPANIES WHICH PA ID THESE AMOUNTS TO THE ASSESSEE ARE REPUTED COMPANIES AND THE ALLEGATI ON THAT THESE PAYMENTS WERE MADE BY THOSE COMPANIES FOR NO REASON CANNOT BE ACCEPTED WITHOUT EVIDENCE. AT PARA 8 PAGE 8 OF THE ORDER OF THE CIT( APPEALS) IT IS HELD AS FOLLOWS : I HAVE NOTED THAT THE INCOME FROM COMMISSION AND BROKERAGE HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION IN THE ORDERS PASSED U/S 14 3(3) FOR THE EARLIER YEARS. THE PROFITS OF EACH OF THE EARLIER Y EARS HAS BEEN SET OFF AGAINST THE BUSINESS LOSSES BROUGHT FORWARD FRO M THE EARLIER YEARS. THUS THIS FINDING OF THE A.O. THAT THE APPEL LANT HAD NEVER EARNED COMMISSION OR BROKERAGE INCOME IN THE EARLIE R YEARS IS WRONG AND BEREFT OF THE FACTS. IT IS SEEN THAT THE PAYER COMPANIES IN THE TDS CER TIFICATES ISSUES HAVE SHOWN THE NATURE OF PAYMENTS AS COMMIS SION AND BROKERAGE AND HAVE DEDUCTED TAXES U/S. 194H OF THE ACT. THE A.OS HAVING JURISDICTION OVER SOME OF THE PAYER CO MPANIES HAD MADE NECESSARY ENQUIRIES U/S 133(6) OF THE ACT. THE AO HAS NOT FOUND ANY EVIDENCE TO SHOW THAT THE AMOUNTS PAID BY THE PAYER COMPANIES WAS NOT IN THE NATURE OF COMMISSION OR BR OKERAGE PAYMENTS. THE APPELLANT HAS PROVIDED THE ADDRESS OF THE PAYER COMPANIES. THE APPELLANT HAS PRODUCED THE DEBIT NOT ES RAISED ON THE COMPANIES FOR THE COMMISSION/BROKERAGE DUE FOR THE SERVICES RENDERED. THE APPELLANT HAS ALSO SUBMITTED THE BANK STATEMENT WHEREIN THE CREDITS FOR THE COMMISSION AND BROKERAG E INCOME ARE REFLECTED. IN VIEW OF THE ABOVE IT IS SEEN THAT TH E APPELLANT HAS 5 DISCHARGED IT ONUS OF PROVING THE SOURCE OF THE INC OMES CREDITED IN THE BOOKS OF ACCOUNT. THE A.O. HAS STATED THAT THE APPELLANT HAVING RENDERED SERVICES WAS REQUIRED TO ADDUCE ADEQUATE D OCUMENTARY PROOF OF HAVING RENDERED SERVICES. THE APPELLANT ON THE OTHER HAND HAS CONTENDED THAT THE SERVICES WERE RENDERED BY PE RSONAL CONTACT TELEPHONE AND INTERNET FACILITY. THE A.R.S SUBMITT ED THAT BUSINESS PROCURED THROUGH SUCH MEANS OF COMMUNICATION CANNOT BE DOCUMENTED AS ALSO EVIDENCED BY RECORDS. THE ONLY M ANNER OF DETERMINATION WHETHER THE SERVICE WERE ACTUALLY REN DERED WOULD BE BY VERIFYING WITH THE PAYER COMPANIES. THIS HAS NOT BEEN DONE BY THE A.O. THE A.O. HAS ALSO NOT ESTABLISHED THAT THE PAYMENTS OF COMMISSION WERE FOR EXTRA COMMERCIAL CONSIDERATION. HAVING REGARD TO THE ENTIRE FACTS AND CIRCUMSTANCES IT IS HELD THAT THE ABSENCE OF DOCUMENTARY AND EVIDENTIARY RECORD CANNO T BE DETERMINATIVE OF THE FACT WHETHER ANY SERVICES HAVE BEEN RENDERED OR NOT. 6. THE CIT(APPEALS) FURTHER OBSERVED THAT THE ASSE SSEE SUBMITTED LETTER FROM PANTALOON RETAIL (INDIA) LTD. THAT THE LOAN WAS DISBURSED BY STATE BANK OF HYDERABAD NARIMAN POINT BRANCH AND NOT STATE BANK OF INDIA NARIMAN POINT BRANCH. THE FIND ING OF THE CIT(APPEALS) THAT HAVING REGARD TO THE FACT THAT TH E PAYER HAS CONFIRMED THAT IT HAD MADE THE PAYMENT IN QUESTION FOR SERVI CES RENDERED BY THE ASSESSEE AND ALSO THE FACT THAT THE AO HAVING JURIS DICTION OVER PANTALOON RETAIL (INDIA) LTD. HAD MADE NECESSARY ENQUIRIES U/ S 133(6) AS REGARDS THE PAYMENTS RECEIVED BY THE ASSESSEE AS THE SAME FACT HAS BEEN INFORMED TO THE AO THE ARGUMENT OF THE ASSESSEE THAT THE INCOM E IN QUESTION IS ASSESSABLE UNDER THE HEAD BUSINESS IS TO BE UPHEL D IS IN OUR HUMBLE OPINION THE CORRECT VIEW. 7. IN THE RESULT WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY AND DISMISS GROUND NO. 1 OF THE REVENUE. 8. GROUND NO. 2 IS ON THE CONTRAVENTION OF RULE 46 A. THE ONLY CLARIFICATION GIVEN BY THE ASSESSEE IN THIS CASE IS THAT THE LOAN WAS TAKEN 6 BY M/S PANTALOON RETAIL (INDIA) LTD. FROM STATE BAN K OF HYDERABAD AND NOT STATE BANK OF INDIA. THIS IS FACTUAL MATTER AND THIS CANNOT BE TREATED AS ADDITIONAL EVIDENCE REQUIRING OPPORTUNITY TO THE AO UNDER RULE 46A. 9. COMING TO GROUND NO. 3 THE DECISION IN THE CAS E OF MACDOWELL & CO. VS. CIT 154 ITR 148 IS NOT APPLICAB LE TO THE CASE. 10. IN THE RESULT WE UPHOLD THE ORDER OF THE CIT( APPEALS) AND DISMISS THE APPEAL OF THE REVENUE. ORDER PRONOUNCED ON THIS 24 TH DAY OF FEBRUARY 2010. SD/- SD/- (R.K. GUPTA) (J. SUDHAKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER. MUMBAI DATED : 24 TH FEBRUARY 2010. WAKODE COPY FORWARDED TO : 1. APPELLANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR A-BENCH. (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT MUMBAI BENCHES MUMBAI.