Income Tax Appellate Tribunal - Agra
Navneet Bansal, Agra vs Assessee on 7 August, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA Nos. 433 & 537/Agra/ 2012
Assessment Years 2007-2008
Shri Navneet Bansal Vs. Income Tax Officer 1(3)
1-Prakash Enclave, Bye Pass Road, Sanjay Place,
Agra. Agra.
(PAN -ABSPB 3698 N)
(Appellant) (Respondent)
Appellant by : Shri Rajendra Sharma &
Shri Manuj Sharma, Advocates
Respondent by : Shri K.K. Mishra, Jr. D.R.
Date of hearing : 07.08.2013
Date of pronouncement : 23.08.2013
ORDER
PER A.L. GEHLOT,ACCOUNTANT MEMBER:
Both these appeals have been filed by the assessee against the orders dated 31.03.2012 and 26.09.2012 passed by the learned CIT(A)-I, Agra for the A.Ys. 2007-08.One appeal pertains to quantum and another pertains to levy of penalty under Section 271(1)(c) of the Act.
ITA No. 433/Agra/2012 by the assessee:-
2. The assessee has raised as many as four grounds of appeal, but the effective ground is in respect of disallowance of traveling allowance of 2 ITA Nos.433 /Agra/2012 537/Agra/2012, A.Ys. 2007-08 Rs.34,160/- and second ground is in respect of addition enhanced by the CIT(A) to the extent of Rs.5,70,000/- as against the addition made by A.O. for Rs.71,940/- being 10% commission expenses.
3. The brief facts of the case are that the assessee is a proprietary concern engaged in trading of vehicles & spare Parts, commission & whole seller of mobile phones. The assessee produced the books of account before the A.O. which were examined by the A.O. The A.O. noticed that the assessee has debited traveling expenses of Rs.3,41,598/- and Rs.7,19,409/- on account of commission expenses. The A.O. found that the assessee has claimed these expenses on the basis of self made vouchers and the same are not fully verifiable. The A.O. disallowed 10% of these expenses of which calculation comes to Rs.34,160/- on account of traveling expenses and Rs.71,940/- on account of commission expenses.
4. We have heard ld. Representatives of the parties and records perused. The A.O. has made the ad-hoc addition of 10% out of travelling expenses without furnishing any specific expenses, which are not incurred for the purpose of the business. Since the assessee has incurred the expenditure wholly and exclusively for the purpose of the business of the assessee, the ad- hoc disallowance cannot be made. We, therefore, find that the expenditure incurred for the purpose of business is allowable under Section 37 of the Act 3 ITA Nos.433 /Agra/2012 537/Agra/2012, A.Ys. 2007-08 and accordingly delete the addition of Rs.34,160/- made by the A.O. out of the travelling expenses.
5. As regards, the disallowance out of commission expenses, the A.O. disallowed 10% of the commission expenses. The assessee filed appeal before the CIT(A). The CIT(A) enhanced the addition to the extent of Rs.5,70,000/-. The CIT(A) carried out the enquiries through A.O. During the appellate proceedings, it was found that all the persons to whom the commission paid, during the inquiry, none of these persons except M/s Action Auto Fab Earth Movers (P) Ltd. could tell any details of services rendered by them in connection with sale of vehicles. These persons were found to be either related to the assessee or they were friends of the assessee with whom even no formal agreement was executed for providing services in selling of vehicles.
6. The CIT(A) found that the commission paid to the following persons has not been found to be allowable because the expenditures were not incurred wholly and exclusively for the purpose of business :- (CIT(A) Page No.23) Name of Person Amount (Rs.) Sanjay Vaishy 40000 Krishna Kumar Goyal 50000 Narendra Vaishy 50000 Sanjay Vaishy 60000 Anuradha Vaishy 1200000 4 ITA Nos.433 /Agra/2012 537/Agra/2012, A.Ys. 2007-08 Rajeev Agarwal 150000 Naveen Kumar Goyal 100000 Total 570000
7. The submission of the assessee was that the commission was paid on account services rendered by the concerned persons. The ld. Authorized Representative submitted that the assessee has paid commission to these parties in earlier year also and same has been accepted by the department. The details of the person was by the ld. Authorized Representative are as under :-
Particulars 31.03.2007 31.03.2006 Sanjay Vaishya (Rs.60000+Rs.40000) 1,00,000/- Krishan Kumar Goyal 50,000/- 50,000/- Narendra Vaishya 50,000/- 40000/- Anuradha Vaishya Gwalior 1,20,000/- 1,50,000/- Rajeev Agarwal 1,50,000/- 80,000/- Naveen Kumar Goyal 1,00,000/- 50,000/-
8. It was submitted that the commission to Sanjay Vaishya was paid on account of 41+Str school bus supply to Hindustan College of Technical Education vide Bill No. 002, dated 05.05.2006. The commission paid to Krishan Kumar Goyal was paid on account of 41+1 Str school buses supply to Holy Public School, Agra, Holy Nursery Public School, Agra and Holy 5 ITA Nos.433 /Agra/2012 537/Agra/2012, A.Ys. 2007-08 Nursery Public School, Agra, vide Bills No. 11, 12 & 14. Similar is the position in respect of other parties to whom the commission was paid. The assessee has established bill numbers and school buses or other seller and tipper supplied to the parties. During the appellate proceedings, the statement of the concerned person were recorded by the A.O. wherein all the parties admitted that commission received against the services rendered for selling the vehicles of the assessee to the parties. They all take the commission received to every cheques in respect of turn of income. The details of permanent account number and the details of ward where these parties were assessed submitted by the assessee and same has been reproduced by the CIT(A) in his order at page No.4. The assessee has also deducted tax at source on the commission payment. The details filed by the assessee has been reproduced by the CIT(A) at Page No.4 of his order. Similarly, the nature of services rendered by these parties, the detailed chart have been filed which has been reproduced by the CIT(A) in his order at Page No.5.
9. The main reason for enhancing the addition by the CIT(A) was that the assessee has failed to establish the service rendered by these parties. In this regard, it is relevant to see nature of business activities of the assessee. The assessee is an authorized dealer of vehicles, buses and others equipments. Considering the nature of business wide convincing and liaison work is required for selling these vehicles particularly which are to be supplied to 6 ITA Nos.433 /Agra/2012 537/Agra/2012, A.Ys. 2007-08 schools colleges and charitable institution etc. The concerned parties have clearly established and identified the vehicles sold through bill number date and parties to whom the vehicles were sold. The nature of assessee's business are that such liaison work is necessary for selling and such liaison work is in the form of service rendered for selling the vehicles. Once it is found that these parties have rendered services for selling the vehicles. The commission expenses are liable to be incurred. Apart from the fact that these parties have rendered services against the commission received, the parties have also assessed to tax and commissions received have been offered to tax. As regards, the observation of the CIT(A) that these persons are relatives and friends of the assessee, merely having friends and relatives, adverse inference cannot be drawn particular by under the circumstances of the case and it is established that these persons have rendered service against the commission paid.
10. As regards, the observation of the CIT(A) regarding statement the concerned parties who purchase the vehicles that they were not having any agent, in this regard, we are of the view that these parties were rendering services to the assessee and it is not necessary that the parties to whom vehicles sold were also having their broker of the same parties. In this line of business it is sufficient if it has been pointed out that institution Hindustan College of Technical Education, Holy Public School, Agra, Holy Nursery 7 ITA Nos.433 /Agra/2012 537/Agra/2012, A.Ys. 2007-08 Public School, Agra and Holy Nursery Public School, Agra requires such buses and convincing them not necessary that the head of the institution having vehicles in which the assessee is dealing as suitable to them. Therefore, merely on examination of CIT(A) by the concerned parties who purchased the vehicles denied about the broker the commission paid cannot be disallowed particularly when the assessee has established that considering their nature of business such as liaisoning or services are necessary for the purpose of business and the parties have admitted that they have rendered the services. The assessee has furnished details and from which it is established that the commission was paid against the services rendered.
11. We, therefore, find that the CIT(A) is not correct in enhancing the addition and A.O. has also not correct in making ad-hoc disallowance. We, therefore, delete the entire addition made by A.O. and enhanced by the CIT(A). The claim of the assessee on account of commission is allowed.
In the result, the appeal of the assessee is allowed. ITA No. 537/Agra/2012 by the assessee:-
12. The grounds raised in this appeal are in respect of levy of penalty of Rs.1,74,420/- under Section 271(1)(c) of the Act. The CIT(A) enhanced the addition to the extent of Rs.5,70,000/- out of the disallowance of commission as against the addition of Rs.71,940/- made by the A.O. The CIT(A) also levied the penalty under Section 271(1)(c) on account of concealing the 8 ITA Nos.433 /Agra/2012 537/Agra/2012, A.Ys. 2007-08 income to the extent of Rs.5,70,000/-. The CIT(A) levied the minimum penalty of which calculation comes to Rs.1,74,420/-. In the light of detailed discussions above the addition has been deleted. In the light of the fact when the addition on the basis of which the CIT(A) calculated penalty is no more, there is no question of levy of penalty under Section 271(1)(c) we accordingly delete the penalty of Rs.1,74,420/- levied by the CIT(A). In the result, the appeal of the assessee is allowed.
13. In the result, both the appeals of the assessee are allowed.
Sd/- Sd/-
(BHAVNESH SAINI) (A.L. GEHLOT)
Judicial Member Accountant Member
Amit/
Copy of the order forwarded to:-
1. Appellant
2. Respondent
3. CIT (Appeals) concerned
4. CIT concerned
5. D.R., ITAT, Agra Bench, Agra
6. Guard File. By Order
Sr. Private Secretary
Income Tax Appellate Tribunal, Agra
True Copy