Elkon Enterprises Pvt. Ltd., Kolkata v. I.T.O.,Ward- 8(2) Kol, Kolkata

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH - B KOLKATA ( ) BEFORE . . SHRI B.R.MITTAL JUDICIAL MEMBER. /AND . . SHRI B.C.MEENA ACCOUNTANT MEMBER. /ITA NO. 1081/KOL /2009 / ASSESSMENT YEAR 2005 - 06 ELKOM ENTERPRISES PVT. LTD. 92 ELLIOT ROAD KOLKATA 700 016 AAACE 5442 K - - - VERSUS - . INCOME - TAX OFFICER WARD 8(2) KOLKATA. ( / A PPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT: / SHRI A.K.TIBREWAL AR / FOR THE RESPONDENT : / SHRI PIYUSH KOLHE DR / ORDER . . SHRI B.R.MITTAL JUDICIAL MEMBER. THE ASSESSEE HAS FILED THIS APPEAL FOR THE ASSESSMENT YEAR 2005 - 06 AGAINST ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) DT.29.4.2009 . IN THE GROUNDS OF APPEAL SUBMITTED ALONGWITH THE MEMORANDUM OF APPEAL THE ASSESSEE HAD TAKEN AS MANY AS FOUR GROUNDS. BUT VIDE LE TTER DT.25.2.2010 THE ASSESSEE HAS SUBMITTED REVISED GROUNDS OF APPEAL WHICH READ AS UNDER : 1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN PRESUMING THAT THE IMPUGNED ASSESSMENT ORDER DATED 27TH DECEMBER 2007 WAS MADE WITHIN THE TIME ALLOWED U/S 153 OF THE INCOME TAX ACT 1961 AND NOT TIME BARRED BY LIMITATION AS CONTENDED BY THE ASSESSEE. 2) THAT EVEN IN ABSENCE OF ANY EXPLANATION WHATSOEVER FROM THE ASSESSING OFFICER ABOUT THE DELAY IN S ERVING THE IMPUGNED ASSESSMENT ORDER BY TWO MONTHS FIVE DAYS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE SAID DELAY WAS INADVERTENT. 2 /ITA NO. 1081/KOL/2009 3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) ERRED IN ALLEGING THAT THE EXPENDITURE OF RS.6 62 922 IN QUESTION WAS IN THE NATURE OF COMMISSION LIABLE TO BE DISALLOWED U/S 40(A)(IA) AS THE ASSESSEE ALLEGEDLY FAILED TO DEDUCT TAX AT SOURCE. 2. IN RESPECT OF GROUND NO.1 OF THE APPEAL WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AT LENGTH AND HAVE ALSO CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. WE OBSERVE THAT THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER DT.27.12.2007 BUT THE SAID ORDER WAS SERVED ON THE ASSESSEE ON 4.3.2008 ALONGWITH THE DEMAND NOTICE. THE ASSESSEE HAS CONTENDED THAT THE SAID ASSESSMENT ORDER WAS NOT PASSED ON 27.12.2007 AND IT WAS PASSED AFTER 31.12.2007 AND THEREFORE IT IS BARRED BY LIMITATION AS PER SECTION 153 OF THE I.T.ACT. WE FIND THAT SIM ILAR CONTENTIONS WERE ALSO RAISED BEFORE THE LEARNED CIT(A) AND LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS AND FACTS AND CIRCUMSTANCES OF THE CASE HELD THAT THE ASSESSMENT ORDER WAS PASSED ON 27.12.2007. THE RELEVANT PORTION OF THE ORDER OF THE LEARN ED CIT(A) CONTAINED IN PARAGRAPH 4 OF HIS ORDER IS REPRODUCED AS UNDER : 4. THE MAIN CONTENTION OF THE APPELLANT IS THAT THE ORDER COULD NOT HAVE BEEN PASSED ON 27.12.2007 IF IT IS SERVED AFTER 2 MONTHS AND 5 DAYS FROM THAT DAY. THERE ARE VARYING INTERPR ETATIONS OF VARIOUS HIGH COURTS IN RESPECT OF TIME - BARRING OF AN ASSESSMENT ORDER U/S 143(3) OF I T.ACT IF IT IS PASSED BEFORE THE DATE OF LIMITATION AND SERVED AFTER THAT DATE. REPRESENTATIVE OF APPELLANT WAS APPRISED OF THE FACT THE HON BLE KOLKATA HIGH C OURT HAS HELD I N CASE OF I NDIA FERRO ALLOY TNDUSTRY PVT. LTD. REPORTED IN (1993) 202 ITR 671 (CAL) THAT - WHAT IS REQUIRED FOR COMPLETION OF THE ASSESSMENT IS THE DETERMINATION OF THE TAX LIABILITY AND ISSUE OF DEMAND NOTICE BUT CERTAINLY NOT THE SERVICE O F THE SAME ON THE ASSESSEE. IN ANY CASE IT IS VERY CLEAR FROM SECTION 153 OF I.T.ACT THAT IN THE INSTANT CASE THE ASSESSMENT ORDER SHOULD HAVE BEEN PASSED BEFORE 31.12.2007. APPELLANTS PLEA IS THAT THAT THE ASSESSMENT ORDER WAS SERVED ALMOST 60 DAYS AFTE R 31.12.2007 THEREFORE THE DATE TYPED IN THE ORDER IS INCORRECT AND ACTUALLY THE ASSESSMENT ORDER IS PASSED ANY TIME AFTER 31.12.2007. APPELLANT HAS CITED THE JUDGMENT IN CASE OF STATE OF ANDHRA PRADESH - VS. - RAMA 3 /ITA NO. 1081/KOL/2009 KISBTAI AH & CO. [(1994) 93 STC 406 (S C ) ] WHERE IT IS HELD THAT IN ABSENCE OF ANY EXPLANATION WHATSOEVER THE COURT MUST PRESUME THAT THE ORDER WAS NOT MADE ON THE DATE IT PURPORTED TO HAVE BEEN MADE. THIS ORDER OF H ON BLE SUPREME COURT IS IN REFERENCE TO SALES TAX ASSESSMENT. THIS DECISION WAS R ENDERED IN VIEW OF ABSENCE OF ANY EX PLANATION PRESENTED BEFORE THE H O N BLE SUPREME COURT. IN INCOME TAX ASSESSMENT PROCEEDINGS THE DETERMINATION OF TAX LIABILITY AND PREPARATION OF DEMAND NOTICE AND SERVICE OF SUCH NOTICE IS CARRIED OUT BY STAFF OTHER THA N THE ASSESSING OFFICER. THE ASSESSING OFFICER WHO WAS ASKED TO REPLY TO THE QUESTION OF DELAY HAS STATED THAT HE JOINED THE OFFICE OF ITO WARD 8(2) KOLKATA ONLY ON 26.11.2008 AND THE REASON FOR SUCH DELAY COULD NOT BE ASCERTAINED EITHER FROM THE RECORDS OR FROM THE OFFICIALS PRESENTLY POSTED IN THIS WARD. APPELLANT HAD REQUESTED IN ITS SUBMISSION THAT THE FACTS MAY BE ASCERTAINED FROM THE RECORDS. THEREFORE THE RECORDS OF ASSESSMENT YEAR 2005 - 06 AND ASSESSMENT YEAR 2006 - 07 AND DEMAND AND COLLECTION REGIST ER OF THE YEAR 2007 - 08 WERE CALLED FOR VERIFICATION. THE PROCESS OF ASSESSMENT AND DEMAND MANAGEMENT IS REQUIRED TO BE LOOKED INTO. ASSESSING OFFICER PASSES THE ORDER. IMMEDIATELY ON PASSING OF ORDER IT GOES TO THE SENIOR TAX ASSISTANT WHO ENTERS THE DEMAN D WORKED OUT IN ASSESSMENT ORDER IN CURRENT DEMAND AND COLLECTION REGISTER. THERE AFTER THE DEMAND NOTICE IS PREPARED BY THE SR. TAX ASSISTANT AND IT IS HANDED OVER TO EITHER THE NOTICE SERVER FOR SERVICE OF THE DEMAND NOTICE AND ASSESSMENT ORDER OR IT IS SENT BY POST. THERE ARE INHERENT DELAYS IN THE PROCESS BEFORE THE DEMAND NOTICE AND ASSESSMENT ORDERS REACH THE ASSESSEE. IN THE PRESENT CASE IT IS APPARENT FROM THE CASE RECORDS OF APPELLANT THA T ON 8.2.2008 THE REFUND WHICH HAD ARISEN FROM THE PROCESSIN G OF RETURN OF ASSESSMENT YEAR 2006 - 07 WAS ADJUSTE D AGAINST THE DEMAND WHICH HAD ARISEN FROM THE INSTANT ASSESSMENT ORDER OF ASSESSMENT YEAR 2005 - 06. THERE IS A STAMP OF THE DATE OF RECEIPT OF 8.2.2008 FROM STATE BANK OF INDIA IN RESPECT OF PAYMENT OF DEMA ND OF RS. 1 31 720 AS PART PAYMENT OF THE TOTAL DEMAND OF 3 43 878/ - ARISING OUT OF THE INSTANT ASSESSMENT ORDER. IT IS TRUE THAT IT IS AN ADJUSTMENT CHALLAN AGAINST THE REFUND OF RS. 1 31 720 OF A.Y. 2006 - 07 STILL IT ESTABLISHES THE FACT BEYOND DOUBT THA T THE ORDER UNDER APPEAL WAS PASSED BEFORE 8.2.2008 THOUGH SERVED TO THE APPELLANT ON 4.3.2008. THE ASSESSMENT FOLDER OF ASSESSMENT YEAR 2006 - 07 WAS ALSO CALLED FOR BY ME. THE RETURN OF ASSESSMENT YEAR 2006 - 07 WAS PROCESSED ON 15/1/2008 AND A REFUND OF RS. 1 31 720/ - RESULTED 4 /ITA NO. 1081/KOL/2009 OUT OF THIS PROCESSING. THE STAFF OF ASSESSING OFFICER HAS PREPARED THE REFUND VOUCHER ON 15.1.2008 ON THE REFUND VOUCHER NO 013364. THIS IS THE SAME REFUND VOUCHER NO. WHICH IS MENTIONED IN THE ADJUSTMENT CHALLAN ACKNOWLEDGED BY SBI ON 8/2/2008. THIS FURTHER PROVES THAT THE ADJUSTMENT CHALLAN WHICH WAS PRESENTED BEFORE SBI ON 8/2/2008 WAS A CTUALLY PREPARED ON 15/1/2008. I T FURTHER PROVES THAT THE DEMAND ARISING OUT OF INSTANT ASSESSMENT ORDER WAS AVAILABLE FOR ADJUSTMENT ON 15/1/2008 FOR THE REFUND ARISING OUT OF THE PROCESSING OF RETURN OF ASSESSMENT YEAR 2006 - 07. THE DEMAND AND COLLECTION REGISTER (DCR) OF THE YEAR 2007 - 08 WAS ALSO VERIFIED. IT WAS FOUND THAT THE DEMAND OF RS. 3 43 878/ - ARISING OUT OF THE ASSESSMENT ORDE R UNDER DIS PUTE WAS ENTERED AT SR.NO 94 IN PAGE 146 OF THIS REGISTER. THERE ARE ASSESSMENT ORDERS AT SR NO 93 95 96 97 ON THE SAME PAGE WHICH WERE ALSO PASSED BEFORE 31/12/2007. THERE IS NO CLAIM THAT THESE ORDERS WERE NOT PASSED BEFORE 31/12/2007. MOREOVER THE ENTRY OF DETAILS OF ASSESSMENT ORDER IN CASE OF APPELLANT AT SR.NO 94 IS NOT AT ALL AN ENTRY WHICH LOOKS LIKE AN INSERTED ENTRY AND IT IS NOT THE LAST ENTRY OF THE DCR. THEREFORE IT IS QUITE OBVIOUS THAT THE ASSESSMENT ORDER UNDER DISPUTE IN CASE OF APPELL ANT WAS PASSED AT THE SAME TIME AS THE O THER ORDERS MENTIONED IN THE DCR. THERE IS NO CLAIM THAT THE OTHER ORDERS OF ASSESSMENT ORDERS MENTIONED AT SR.NO. 93 95 TO 121 (LAST ENTRY) WERE PASSED AFTER 3 1 - 12 - 2007. APPELLANT WAS GIVEN AN INSPECTION OF THE DE MAND AND COLLECTION REGISTER AS WELL AS THE ASSESSMENT RECORDS OF ASSESSMENT YEAR 2005 - 06 AND ASSESSMENT YEAR 2006 - 07 DURING THE APPELLATE PROCEEDINGS. AFTER ANALYZING ALL THE RECORDS THE APPELLANT HAS STATED IN ITS REPLY DATED 17.2.2009 THAT AT THE BEST GO TO SUPPORT A SUGGESTION THAT THE IMPUGNED ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2005 - 06 WAS IN EXISTENCE ON 15 TH JANUARY 2008. THEREFORE THE FACT THAT AN ORDER WHICH WAS EXISTENT ON 15.1.2008 COULD BE SERVED ON APPELLANT ON 4.3.2008 FURTHER STRE NGTHENS THE FACT THAT DUE TO SAME INADVERTEN T DELAY THE ORDER WHICH WAS EXISTENT ON 27 122007 WAS SERVED ON APPELLANT ON 4 .3.2008. IT APPEARS TO BE A CASE OF INADVERTENT DELAY THAT THE ORDER WAS NOT SERVED AFTER IT WAS PASSED ON 27.12.2007. THERE IS NO EV IDENCE WITH THE APPELLANT TO PROVE THAT THE ORDER WAS PASSED ON ANY DATE AFTER 31.12.2007. IF I HAVE TO CHOOSE BETWEEN BACKDATING AND INADVERTENT DELAY IN THE INSTANT CASE THE REASONS FOR INADVERTENT DELAY ARE 5 /ITA NO. 1081/KOL/2009 STRONGER THAN BACKDATING. THEREFORE IT CANNO T BE SAID IN THE INSTANT CASE THAT THE ASSESSMENT ORDER WAS NOT PASSED ON 27.12.2007. 2.1. DURING THE COURSE OF HEARING BEFORE US THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSMENT ORDER HAS NOT BEEN SERVED WITHIN THE REASONABLE TIME AND SINCE IT WAS SERVED AFTER A PERIOD OF TWO AND HALF MONTHS AND THE ASSESSING OFFICER COULD NOT EXPLAIN THE REASON FOR THE DELAY IN SERVICE OF THE ASSESSMENT ORDER IT IS TO BE HELD THAT THE SAME WAS PASSED AFTER THE EXPIRY OF THE PERIOD OF LIMITATION AND PLACED RELIANCE ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF STATE OF ANDHRA PRADESH V.M.RAMAKIKSHTAIAH & CO. [(1994) 93 STC 406 (SC)] THE DECISION OF P & H HIGH COURT IN THE CASE OF CIT V. SREE NARAYANA CHANDRIKA TRUST [(1995) 212 ITR 456 (KER)] THE D ECISION OF P & H HIGH COURT IN THE CASE OF CIT V. M/S.RAI BAHADUR KISHORE CH AND & SONS (2008 TMI 3777) THE DECISION OF WEST BENGAL TAXATION TRIBUNAL IN THE CASE OF MAFATLAL INDUSTRIES LTD. AND ANOTHER V. CTO & O THERS [(1996) 101 STC 461 (WBTT ] THE DEC ISION OF JODHPUR ITAT IN THE CASE OF SHANTILAL GHODAWAT & ORS. V. ACIT [(2009) 126 TTJ 135 (JODHPUR ITAT)]. THE LEARNED AR OF THE ASSESSEE FURTHER SUBMITTED THAT THE LEARNED CIT(A) HAS RELIED ON THE DECISION OF INDIA FERRO ALLOY INDUSTRY PVT. LTD. V. CIT [(1993) 202 ITR 671] BUT THE LEARNED CIT(A) HAS NOT RIGHTLY CONSIDERED THE SAID DECISION. LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE IMPUGNED ASSESSMENT ORDER IS BAD BEING BARRED BY LIMITATION. 2.2. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE I MPUG NED ORDER OF THE LEARNED CIT(A) AND SUBMITTED THAT THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE I NDIA FERRO ALLOY TNDUSTRY PVT. LTD. REPORTED IN (1993) 202 ITR 671 (CAL) SQUARELY APPLIES TO THE FACTS OF THE CASE AND HAS RIGHTLY BEEN CONSIDER ED BY THE LEARNED CIT(A). THE LEARNED DR FURTHER SUBMITTED THAT THE POWER OF THE LEARNED CIT(A) IS CO - TERMINUS AS THAT OF THE ASSESSING OFFICER AND THE LEARNED CIT(A) HAS ASCERTAINED THE FACTS AS TO WHETHER THE ASSESSMENT ORDER WAS MADE ON 27.12.2007 OR LATER ON. HE SUBMITTED THAT MERELY BECAUSE THE SUBSEQUENT INCUMBENT ASSESSING OFFICER COULD NOT EXPLAIN FOR THE TIME TAKEN ABOUT TWO MONTHS BETWEEN THE DATE OF ORDER AND SERVICE THEREOF IS NOT FINAL AND THE 6 /ITA NO. 1081/KOL/2009 LEARNED CIT(A)HAS GIVEN ADEQUATE ELABORATE REASONS AFTER M AKING INVESTIGATION THAT THE ASSESSMENT WAS PASSED ON THE DATE AS INDICATED IN THE ASSESSMENT ORDER AND NOT LATER ON. 2.3. IN THE PRESENT CASE IT IS NOT DISPUTED THAT THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER IS DATED 27.12.2007 BUT THE SAID ORDER WAS SERVED ON THE ASSESSEE ON 4.3.2008 ALONGWITH DEMAND NOTICE AND THERE IS NO REASON GIVEN BY THE ASSESSING OFFICER FOR TAKING SUCH A LONG TIME OF TWO MONTHS AND FIVE DAYS FOR ITS SERVICE ON THE ASSESSEE. HOWEVER THE LEARNED CIT(A) HAS STATED THE REASON FOR DELAY IN SERVICE OF ASSESSMENT ORDER. FURTHER THE LEARNED CIT(A) HAS RELIED ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF INDIA FERRO ALLOY INDUSTRY PVT. LTD. V. CIT [(1993) 202 ITR 671 (CAL.)] . IN THE SAID CASE I T WAS CONTENDED ON BE HALF OF THE ASSESSEE THAT THE DATE OF COMPLETION OF ASSESSMENT SHOULD BE TAKEN AS OCTOBER 22 1980 ON WHICH DATE THE ASSESSMENT ORDER WAS SERVED ON THE ASSESSEE AND NOT ON OCTOBER 15 1980 WHEN IT WAS SIGNED BY THE INCOME TAX OFFICER AND HONBLE HIGH COU RT HAS HELD THAT WHAT IS REQUIRED FOR COMPLETION OF THE ASSESSMENT IS THE DETERMINATION OF THE TAX LIABILITY AND ISSUE OF DEMAND NOTICE BUT CERTAINLY NOT THE SERVICE OF THE SAME ON THE ASSESSEE . WE OBSERVE THAT THE LEARNED CIT(A) HAS ALSO STATED IN HIS ORD ER THE STEPS PROPOSED TO BE TAKEN AFTER THE ASSESSMENT IS MADE AND IT IS DISPATCHED TO THE ASSESSEE. WE OBSERVE THAT THE LEARNED CIT(A) HAS STATED THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 2006 - 07 WAS PROCESSED ON 15.1.2008 AND IT RESULTED INTO A REFUND OF RS.1 32 720 WHICH WAS ADJUSTED AGAINST THE TOTAL DEMAND OF RS.3 43 878 ARISING OUT OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE IT IS EVIDENT THAT THE ASSESSMENT WAS READY BEFORE 15.1.2008. NOT ONLY THIS THE LEARNED CI T(A) IN HIS ORDER HAS ALSO STATED THE ENTRIES MADE IN THE REGISTER AND THERE ARE OTHER ENTRIES ON THE SAME PAGE OF THE REGISTER EVIDENCING THAT IN OTHER CASES ALSO THE ASSESSMENT ORDERS WERE PASSED BEFORE 31.12.2007 AND THE SAME WERE ENTERED INTO THE REGIS TER. IT IS RELEVANT TO STATE THAT AT THE TIME OF HEARING ATTENTION OF THE LEARNED AR OF THE ASSESSEE WAS ALSO DRAWN TO THE OBSERVATION MADE BY THE LEARNED CIT(A) THAT THE ENTRY MADE IN THE REGISTER AT SL.94 IS NOT AT ALL AN ENTRY WHICH LOOKS LIKE AN INSER TED ENTRY. THE LEARNED AR OF THE ASSESSEE CONTENDED THAT ALL THOSE ENTRIES MADE HAVE 7 /ITA NO. 1081/KOL/2009 BEEN INSERTED LATER ON AND IF THE OTHER ASSESEE HAVE NOT DISPUTED THE SAID FACT IT DOES NOT TAKE AWAY THE RIGHT OF THE ASSESSEE. WE MAY STATE HERE WITH ALL OUR HUMBLENES S THAT THE SAID CONTENTION OF THE LEARNED AR OF THE ASSESSEE HAS NO MERIT AND RATHER THE ENTRY IN THE REGISTER ESTABLISHES THAT THE ASSESSMENT ORDER WAS MADE ON 27.12.2007 AND NOT LATER ON AS CONTENDED BY THE LEARNED AR OF THE ASSESSEE. 2.4. WE HAVE ALSO GONE THROUGH THE CASES CITED BY THE LEARNED AR OF THE ASSESSEE (SUPRA). WE OBSERVE THAT THE CASE OF STATE OF ANDHRA PRADESH V.M.RAMAKIKSHTAIAH & CO. [(1994) 93 STC 406 (SC)] RELATES TO AN ISSUE ARISING UNDER THE ANDHRA PRADESH GENERAL SALES TAX ACT. IN T HE SAID CASE THE REVISION ORDER WAS PASSED ON 6.1.1973 BUT IT WAS SERVED UPON THE ASSESSEE ONLY ON 21.11.1973 I.E. AFTER A PERIOD OF TEN AND HALF MONTHS AND THERE WAS NO EXPLANATION FROM THE DEPUTY COMMISSIONER AS TO WHY IT WAS SO DELAYED. HOWEVER IN THE CASE BEFORE US WE OBSERVE THAT THE LEARNED CIT(A) HAS STATED THE PROCEDURE WHICH IS FOLLOWED BEFORE DISPATCH OF THE ASSESSMENT ORDER TO THE ASSESSEE AND CONSIDERING THE REASONS STATED BY HIM AS STATED HEREIN ABOVE IN PARAGRAPH 2 WE ARE OF THE CONSIDERED VIEW THAT THE ABOVE CASE RELIED UPON BY TH E LEARNED AR OF THE ASSESSEE DOES NOT SUPPORT THE CASE OF THE ASSESSEE. FURTHER THE CASE OF CIT V. M/S.RAI BAHADUR KISHORE CHAND & SONS (2008 TMI 3777) ALSO DOES NOT APPLY TO THE FACTS OF THE CASE BEFORE US AS IN THAT CASE ALTHOUGH THE ASSESSMENT ORDER WAS PASSED ON 26.3.2004 BUT IT WAS SERVED ON THE ASSESSEE BY WAY OF AFFIXTURES AND THE DEPARTMENT FAILED TO PRODUCE ANY EVIDENCE AS TO WHY THE SAME NOT WAS NOT DISPATCHED ON OR BEFORE 31.3.2004. IN VIEW OF THE ABOVE FACTS HONBLE P & H HIGH COURT HELD THAT THE ASSESSMENT ORDER WAS TIME BARRED. FURTHER IN RESPECT OF THE DECISION OF THE ITAT JODHPUR BENCH [SHANTILAL GHODAWAT & ORS. V. ACIT [(2009) 126 TTJ 135] WE OBSERVE THAT THE ASSESSMENT ORDERS WERE PASSED ON 28 .12.2007 AND THE SAME WERE DISPATCHED TO THE ASSESSEE ON 2.1.2008. THE SAID ASSESSMENT ORDERS RELATES TO SEARCH CARRIED ON 7.3.2006. RESPECTFULLY WE STATE THAT IN THE SAID ORDER OF THE ITAT THE DETAILS WERE NOT GIVEN AS TO WHY THE ASSESSMENTS ARE BARRED BY LIMITATION PARTICULARLY WHEN THE ASSESSMENT ORDERS WERE ADMITTEDLY PASSED ON 28.12.2007 AND DISPATCHED TO THE ASSESSEE ON 2.1.2008. SINCE WE HAVE 8 /ITA NO. 1081/KOL/2009 STATED HEREIN ABOVE RELYING ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF I NDIA FER RO ALLOY TNDUSTRY PVT. LTD. REPORTED IN (1993) 202 ITR 671 (CAL) THAT WHAT IS REQUIRED IS TO COMPLETE THE ASSESSMENT WITHIN THE PERIOD OF LIMITATION PRESCRIBED AND NOT THE SERVICE OF THE SAME ON THE ASSESSEE. RESPECTFULLY FOLLOWING THE SAID DECISION OF HON BLE JURISDICTIONAL HIGH COURT AND CONSIDERING THE FACTS OF THE CASE BEFORE US WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSMENT ORDER WAS PASSED BY THE ASSESSING OFFICER ON THE DATE AS STATED IN THE ASSESSMENT ORDER I.E. 27.12.2007 AND NOT THEREAFTER AL THOUGH THE SAME WAS SERVICED AFTER A PERIOD OF TWO MONTHS AND FIVE DAYS. HENCE WE UPHOLD THE ORDER OF THE LEARNED CIT(A) THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS NOT BARRED BY LIMITATION AND REJECT GROUNDS NO.1 AND 2 OF THE ASSESSEE. 3. IN RESPECT OF GROUND NO.3 OF THE REVISED GROUNDS OF APPEAL THE RELEVANT FACTS ARE THAT THE ASSESSING OFFICER HAS STATED THAT THE ASSESEE - COMPANY HAS DEBITED RS.6 62 9 9 2 TOWARDS SALES PROMOTION EXPENSES. WE MAY MENTION HERE THAT THIS AMOUNT HAS BEEN STATE D DIFFERENTLY AT DIFFERENT PLACES IN THE ORDERS OF THE AUTHORITIES BELOW. THEREFORE WE ARE CONSIDERING THE AMOUNT OF RS.6 62 922 AS DISPUTED BY THE ASSESSEE IN THE GROUNDS OF APPEAL ITSELF. IT WAS STATED THAT THE ASSESSEE - COMPANY ALONGWITH ITS SISTER CONC ERN M/S.LM & CO . HAD ENTERED INTO AN AGREEMENT WITH SYMPHONY COMFORT SYSTEMS LTD. FOR MARKETING THEIR PRODUCT THROUGH ANARELECS (P) LTD AND THE ASSESSEE SHARED A TOTAL EXPENSES OF RS.12 74 064 AND PAID ITS SHARE OF RS.6 62 922 TO ANARELECS (P) LTD THROUG H M/S.LM & CO . THE ASSESSING OFFICER STATED THAT THE ASSESSEE COULD NOT FURNISH AGREEMENT OF SYMPHONY COMFORT SYSTEMS LTD. WITH THE ASSESSEE - COMPANY. THEREFORE THE ASSESSING OFFICER DISALLOWED THE SAID AMOUNT OF RS.6 62 992 AND ADDED THE SAME TO THE TOTA L INCOME OF THE ASSESSEE ON THE GROUND THAT THE SAID EXPENDITURE WAS NOT INCIDENTAL TO ASSESSEES BUSINESS. BEING AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3.1. ON BEHALF OF THE ASSESSEE IT WAS CONTENDED BEFORE THE LEARNED CIT(A) THAT THE ASSESSEE COMPANY ENTERED INTO A CONSIGNMENT AGENCY AGREEMENT WITH SYMPHONY COMFORT SYSTEMS LTD. FOR SALE OF THEIR PRODUCTS IN THE STATE OF WEST BENGAL. IT WAS FURTHER CONTENDED THAT BY ANOTHER INDEPENDENT AGREEMENT 9 /ITA NO. 1081/KOL/2009 SYMPHONY COMFORT SYSTEM S LTD. APPOINTED ONE ANARELECS (P) LTD AS ITS REGIONAL DISTRIBUTOR FOR THE STATES OF ORISSA AND WEST BENGAL FOR MARKETING AND POPULARIZING SYMPHONY PRODUCTS. SINCE THE ASSESSEE COMPANY DOMINATED THE MARKET OF WEST BENGAL FOR DOMESTIC ELECTRICAL APPLIANC ES AND OTHER LIKE CONSUMER DURABLES ANARELECS (P) LTD COULD NOT HAVE ANY SIGNIFICANT SHARE IN WEST BENGAL MARKET THE SAID ANARELECS (P) LTD APPOINTED M/S.LM & CO. AS ITS CONSIGNMENT AGENT UNDER IT IN WEST BENGAL FOR MARKETING THE SYMPHONY PRODUCTS IN CO MPETITION WITH THE ASSESSEE - COMPANY. IT IS RELEVANT TO STATE THAT M/S.LM & CO. IS THE SISTER CONCERN OF THE ASSESSEE - COMPANY. 3.2. IT IS OBSERVED THAT LM & CO. ALSO COULD NOT DO BETTER TO MARKET THE PRODUCTS AND ACCORDINGLY THE ASSESSEE COMPANY MARKETED THE SYMPHONY PRODUCTS RECEIVED BY M/S.LM & CO. FROM ANARELECS (P) LTD. IT WAS CONTENDED BEFORE THE LEARNED CIT(A) THAT ANARELECS (P) LTD. MADE PROFITS OF RS.5 52 314 ON THE SELLING OF SYMPHONY PRODUCTS PROCURED FROM THE ASSESSEE - COMPANY BUT THIS WAS OB JECTED TO BY THE PRINCIPAL OF THE ASSESEE COMPANY NAMELY SYMPHONY COMFORT SYSTEMS LTD. BECAUSE THE ASSESSEE COMPANY AS PER AGREEMENT ENTERED WITH SYMPHONY COMFORT SYSTEMS LTD. WAS TO SALE THE SYMPHONY PRODUCTS TO M/S.MEDICOS AGENCIES ONLY. IT WAS CONTEN DED THAT THE SAID VARY GOODS WERE SUBSEQUENTLY SOLD TO THE CUSTOMERS OF WEST BENG A L AGGREGATING TO RS.23 82 420 AND EARNED A PROFIT OF RS.10 80 822. THE SAID PRODUCTS WERE EARLIER PROCURED BY M/S.LM & CO. AT RS.8 55 002 AND SOLD THEM FOR RS.14 07 316 THER EBY EARNING A PROFIT OF RS.5 52 314. IN NUTSHELL THERE WAS A TOTAL PROFIT ON THE SAID SYMPHONY GOODS WHICH WERE SOLD TO OTHERS AND NOT TO M/S.MEDICOS AGENCY THE ASSESSEE COMPANY AND M/S.LM & CO. MADE PROFITS AGGREGATING TO RS.16 33 136. THE ASSESSEE CON TENDED THAT M/S.LM & CO. PAID THE TOTAL AMOUNT OF RS.12 74 064 TO ANARELECS (P) LTD. TOWARDS EXPENSES AND THE ASSESSEE COMPANY SHARE D THE AMOUNT OF RS.6 62 922. 3.3. HOWEVER THE LEARNED CIT(A) HAS HELD THAT THE SAID PAYMENT OF RS.12 74 064 BY M/S.LM & C O. TO ANARELECS (P) LTD. WAS PAID TOWARDS COMMISSION AND ACCORDINGLY THE ASSESSEE COMPANY HAS PAID RS.6 62 922 AS MARKET COMMISSION TO M/S.LM & CO. THIS AMOUNT HAS BEEN CLEVERLY GIVEN A COLOUR OF 10 /ITA NO. 1081/KOL/2009 SHARING OF PROFIT. SINCE NO TDS WAS DEDUCTED ON THE AMOUN T OF THIS PAYMENT THE LEARNED CIT(A) HAS DISALLOWED THE SAID EXPENDITURE OF RS.6 62 922 U/S.40(A)(IA) OF THE INCOME - TAX ACT 1961. HENCE THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 3.4. DURING THE COURSE OF HEARING THE LEARNED AR OF THE ASSESS EE REITERATED THE ABOVE FACTS AND SUBMITTED THAT THE SAID AMOUNT OF RS.6 62 922 WAS THE EXPENDITURE INCURRED BY THE ASSESSEE AND THE LEARNED CIT(A) HAS WRONGLY CONSIDERED IT AS COMMISSION. THE LEARNED AR OF THE ASSESSEE FURTHER REFERRED DEBIT NOTE GIVEN BY M/S.LM & CO. OF RS.6 49 896 STATING TO HAVE BEEN PAID BY IT WHICH WAS FURTHER REMITTED BY M/S.LM & CO. TO ANARELECS (P) LTD. TOWARDS MARKETING EXPENSES. IT IS A FACT THAT THE LEARNED AR OF THE ASSESSEE COULD NOT GIVE THE DETAILS OF THE SAID EXPENSES AS CLAIMED BY IT SAVE AND EXCEPT PRODUCING THE DEBIT NOTE. IN REPLY TO A QUERY FROM THE BENCH THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE SAID AMOUNT WAS REMITTED BY THE ASSESSEE TO M/S.LM & CO. PURSUANT TO THE MOU ENTERED INTO DT.20.11.2004 AND RE FERRED TO PAGES 10 AND 11 OF THE PAPER BOOK. HE SUBMITTED THAT THE DISALLOWANCE IS NOT JUSTIFIED. 3.5. ON THE OTHER HAND THE LEARNED DR SUPPORTED THE ORDER OF THE LEARNED CIT(A) AND SUBMITTED THAT THE SAID AMOUNT OF RS.12 74 064 WAS REMITTED TO ANARELECS (P) LTD . BY M/S.LM & CO. AS COMMISSION AND SINCE NO TDS WAS DEDUCTED THE LEARNED CIT(A) HAS RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE AS PER SECTION 40(A)(IA) OF THE I.T.ACT 1961. 3.6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS OF THE LEARNE D REPRESENTATIVES. WE OBSERVE THAT THE ASSESSEE COMPANY WAS APPOINTED AS SOLE SELLING AGENT FOR THE STATE OF WEST BENGAL BY SYMPHONY COMFORT SYSTEMS LTD. TO MARKET THEIR GOODS. AS PER THE SAID AGREEMENT THE ASSESSEE COMPANY WAS TO GIVE THE ENTIRE CONSIGN MENT OF SYMPHONY PRODUCTS TO ONLY M/S.MEDICOS AGENCY. WE OBSERVE THAT ONE ANARELECS (P) LTD. WAS ALSO APPOINTED AS DISTRIBUTOR FOR THE STATE OF WEST BENGAL TO MARKET SYMPHONY PRODUCTS OF SYMPHONY COMFORT SYSTEMS LTD. IN THE STATE OF WEST BENGAL. WE ALSO OBSERVE THAT THE SAID ANARELECS (P) LTD. IS STATED TO HAVE APPOINTED M/S.LM & CO. THE SISTER CONCERN OF THE ASSESSEE COMPANY TO MARKET SUCH SYMPHONY PRODUCTS IN THE STATE OF WEST BENGAL. 11 /ITA NO. 1081/KOL/2009 APPARENTLY IT APPEARS TO BE CONTRADICTORY. WE ALSO OBSERVE THAT TH E ASSESSEE COMPANY SOLD TO M/S.LM & CO. AND THE SAID CONCERNS SOLD SYMPHONY GOODS TO OTHER PERSONS. IT ALSO APPEARS TO BE CONTRARY TO THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH SYMPHONY COMFORT SYSTEMS LTD. BE THAT AS IT MAY WE OBSERVE THAT IN THE ABOV E PROCESS THERE WAS A PROFIT OF RS.10 80 822 TO THE ASSESSEE COMPANY. M/S.LM & CO. PROCURED GOODS WORTH RS.8 55 000 FROM THE ASSESSEE AND IT ALSO MADE PROFIT OF RS.5 52 314. THUS I T IS OBSERVED THAT OUT OF THE SAID AGGREGATE PROFIT OF R S.16 33 166 M/S .LM & CO. REMITTED A SUM OF RS.12 74 064 TO ANARELECS (P) LTD. STATED TO BE TOWARDS MARKETING EXPENSES AND THE ASSESSEE - COMPANY CONTRIBUTED A SUM OF RS.6 62 922 TO M/S.LM & CO. HOWEVER THE DEBIT NOTE PLACED ON PAPER BOOK RAISED BY M/S.LM & CO. TO T HE ASSESSEE COMPANY IS OF RS.6 49 896.IN THE DEBIT NOTE IT IS STATED THAT THE SAID AMOUNT IS RECOVERED FROM THE ASSESSEE - COMPANY BY M/S.LM & CO. TOWARDS MARKETING EXPENSES. WE OBSERVE THAT THE ASSESSING OFFICER MADE THE DISALLOWANCE STATING THAT THE SAID EXPENSES WAS NOT INCIDENTAL TO THE BUSINESS EXPENSES AND WHEREAS THE LEARNED CIT(A) HAS NOT DOUBTED THE GENUINENESS OF THE EXPENSES BUT HAS DISALLOWED THE SAID AMOUNT STATING THE SAME TO BE PAYMENT OF COMMIS SION . SINCE NO TDS WA S DEDUCTED HE HAS DISALLOW ED THE SAID CLAIM U/S.40(A)(IA) OF THE I.T.ACT 1961. 3.7. CONSIDERING THE ABOVE FACTS BEFORE US WE ARE OF THE CONSIDERED VIEW THAT THE CONCLUSION OF THE LEARNED CIT(A) TO HOLD THAT THE PAYMENT MADE BY THE ASSESSEE COMPANY TO M/S.LM & CO. IS ON ACCOUNT O F COMMISSION IS NOT SUPPORTED BY THE CONTENTS OF THE AGREEMENT AND THE FACTS PLACED ON RECORD. AT THE SAME TIME THE BASIS ON WHICH THE SAID PAYMENT HAS BEEN REMITTED BY THE ASSESSEE COMPANY TO M/S.LM & CO. UNDER THE HEADING MARKETING EXPENSES IS NOT SU PPORTED BY ANY DETAILS AND/OR BREAKUP OF EXPENSES WITH SUPPORTING MATERIAL TO ESTABLISH THAT THE SAID AMOUNT WAS ACTUALLY THE MARKETING EXPENSES INCURRED BY M/S.LM & CO. WHICH WAS REIMBURS ED BY THE ASSESSEE COMPANY FOR SELLING THE PRODUCTS TO OTHER CUSTO MERS IN WEST BENGAL ALONGWITH M/S.LM & CO. SINCE THE ASSESSEE COMPANY IN THE SAID TRANSACTION HAS MADE A PROFIT OF RS.10 80 822 IN THE ABOVE ARRANGEMENT THOUGH THE SAID ARRANGEMENT WAS NOT IN CONFORMITY WITH THE AGREEMENT/MOU ENTERED INTO BY THE ASSESSEE COMPANY WITH ITS PRINCIPAL NAMELY 12 /ITA NO. 1081/KOL/2009 SYMPHONY COMFOR T SYSTEMS LTD. WE ARE OF THE CONSIDERED VIEW THAT IT WILL BE FAIR AND REASONABLE TO ALLOW 50% OF THE EXPENSES OF RS.6 49 096 THE AMOUNT SHOWN IN THE DEBIT NOTE RAISED BY M/S.LM & CO. COPY OF WHICH IS P LACED ON RECORD. IN VIEW OF THE ABOVE THE ORDERS OF THE AUTHORITIES BELOW IS MODIFIED TO THE EXTENT INDICATED ABOVE AND GROUND NO.3 OF THE REVISED GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IS ALLOWED IN PART BY ALLOWING 50% OF RS.6 49 096 TOWARDS MARKETING EXPENSES AS AGAINST RS.6 62 922 CLAIMED BY THE ASSESSEE (I.E. THE AMOUNT STATED IN THE GROUNDS OF APPEAL TAKEN BEFORE US). 4. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 30.04.2010 SD/ - SD/ - ( . . ) (B.C.MEENA) ACCOUNTANT MEMBER. ( . . ) B.R.MITTAL JUDICIAL MEMBER ( ) DATE: 30.04.2010 - COPY OF THE ORDER FORWARDED TO: 1. / THE APPELLANT : ELKOM ENTERPRISES PVT. LTD. 92 ELLIOT ROAD KOLKATA 700 016. 2 / THE RESPOND ENT : INCOME - TAX OFFICER WARD 8(2) KOLKATA. 3. / THE CIT 4. ( ) / THE CIT(A) 5. / DR KOLKATA BENCHES KOLKATA 6. GUARD FILE . / TRUE COPY / BY ORDER / DEPUTY REGISTRAR . ( /H.K.PADHEE) / SNR.PRIVATE SECRETARY.