AVIS IMPEX P. LTD, MUMBAI v. ITO 4(1)(4), MUMBAI

ITA 1203/MUM/2009 | 2004-2005
Pronouncement Date: 22-12-2010 | Result: Allowed

Appeal Details

RSA Number 120319914 RSA 2009
Assessee PAN AACCA8038R
Bench Mumbai
Appeal Number ITA 1203/MUM/2009
Duration Of Justice 1 year(s) 10 month(s) 2 day(s)
Appellant AVIS IMPEX P. LTD, MUMBAI
Respondent ITO 4(1)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-12-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 22-12-2010
Assessment Year 2004-2005
Appeal Filed On 20-02-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI RAJENDRA SINGH (AM) ITA NO. 1203/MUM/2009 ASSESSMENT YEAR : 2004-05 M/S. AVIS IMPEX PRIVATE LIMITED 2/12 RIDHI SIDHI BHAVAN BABU GENU ROAD PRINCESS STREET MUMBAI-400 002. ..( APPELLANT ) P.A. NO. (AACCA 8038 R) VS. INCOME TAX OFFICER4(1)(4) AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. ..( RESPONDENT ) APPELLANT BY : SHRI UTTAM CHAND BOTHRA RESPONDENT BY : SHRI S UMEET KUMAR O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 15.10.2008 PASSED BY THE LD. CIT(A) FOR T HE ASSESSMENT YEAR 2004-05. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN MANUFACTURING AND TRADING IN CLOTHES FILE D RETURN DECLARING TOTAL INCOME AT RS.14 54 140/-. DURING THE COURSE OF ASSESSMENT PROCEEDING IT WAS OBSERVED BY THE ASSESSING OFFICER THAT I N THE AUDIT REPORT THE ASSESSEE HAS SHOWN BROKERAGE PAID TO M/S. R. R AVINDRA AND CO. RS.1 80 203/- THE PROPRIETOR OF WHICH IS SMT. KA MALA DEVI MUKIM MOTHER OF SHRI RAVINDRA MUKIM DIRECTOR OF THE COMPAN Y COVERED AS PERSONS SPECIFIED U/S.40A(2)(B) OF THE INCOME TAX ACT 196 1 (THE ACT). THE ASSESSEE WAS ASKED TO EXPLAIN THE SAME. FURTHER INFO RMATION ITA NO.1203/M/09 A.Y:04-05 2 U/S.133(6) OF THE ACT WAS ALSO SOUGHT FROM M/S. R. RAVIND RA AND CO. IN RESPONSE SMT. KAMALA DEVI MUKIM FILED REPLY IN TA PAL ALONGWITH COPY OF RETURN FOR ASSESSMENT YEAR 2004-05 STATING THAT SH E IS FILING RETURN OF INCOME AT KOLKATA. IT WAS FURTHER OBSERVED BY THE ASSESSING OFFICER THAT SINCE SHE HAS NOT REPLIED WHETHER SUCH SERVI CES ARE RENDERED BY HER TO ANY OTHER PARTY OTHER THAN ASSESSEE AGAIN A NOTICE U/S.133(6) WAS ISSUED. IN REPLY IT WAS STATED BY HER T HAT : 1) NATURE OF BUSINESS IS TEXTILE AGENCY BUSINESS 2) EXPERIENCE IS ABOVE 50 YEARS AND RENDERED TO LARGE NUM BER OF COMPANIES 3) AGREEMENT WAS ON THE VERBAL AND 4) EDUCATIONAL QUALIFICATION IX STANDARD. THE ASSESSING OFFICER FURTHER OBSERVED THAT AGAIN THE AR OF THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO JUSTIFY THE PAYMENT U/S.40A(2)(B). HOWEVER NO JUSTIFICATION WAS RECEIVED EXCEPT THE DETAILS OF BROKERAGE. THE ASSESSING OFFICER AFTER CONSIDE RING THE MATERIAL AVAILABLE ON RECORD HAS OBSERVED THAT SMT. K AMALA DEVI MUKIM IS MORE THAN 68 YEARS OLD AND IN HER OLD AGE IT IS DIFFICULT TO CONTACT PARTIES TO MAKE SALES AND IT IS ALSO DIFFICULT TO BELIEVE THAT SHE RENDERED ANY SERVICES FOR MAKING SALES WITH RESPECT TO MO RE THAN 40 PARTIES. HE FURTHER OBSERVED THAT THE GENUINENESS OF TH E SERVICES RENDERED BY HER CANNOT BE ACCEPTED AS HER LINGUISTIC EFF ICIENCY IS NOT HIGH. HE FURTHER OBSERVED THAT SHE HAS NOT RECEIVED ANY BROKERAGE FROM ANY OTHER PARTY AND HER STATEMENT THAT SHE HAS RE NDERED SERVICES TO MANY COMPANIES IS NOT A CORRECT CLAIM AND HER CL AIM OF EXPERIENCE IS ALSO NOT CORRECT. FURTHER THAT HER BALANCE SHEET DOES NOT INDICATE THAT SHE HAS ANY OFFICE OR INFRASTRUCTURE WHICH IS REQUIRED FOR CONDUCTING THE SALES. FURTHER THAT ON TOTAL PROFI T SHOWN BY SMT. ITA NO.1203/M/09 A.Y:04-05 3 KAMALA DEVI MUKIM OF RS.1 80 203/- AFTER CLAIMING DE DUCTION U/S.88B THE TAX PAID WORKED OUT TO RS.17 235/- WHEREAS THE CO MPANY WAS REQUIRED TO PAY TAX @ 35% AND THUS THE DIRECTOR OF T HE COMPANY DIVERTED ITS INCOME IN THE GUISE OF BROKERAGE TOWARDS H ER MOTHER AND REDUCED ITS TAX LIABILITY. UNDER THESE CIRCUMSTANCES THE A SSESSING OFFICER DISALLOWED THE BROKERAGE OF RS.1 80 203/- UNDE R SECTION 40 A(2)(B) AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE AND ACCORDINGLY COMPLETED THE ASSESSMENT AT AN INCOME OF RS.16 34 340/- VIDE ORDER DATED 12.12.2006 PASSED U/S. 143(3) OF THE ACT. 3. ON APPEAL BEFORE THE LD. CIT(A) THE ASSESSEE HAS FIL ED WRITTEN SUBMISSIONS DATED 23.4.2008 WHICH ARE AS UNDER :- 1. THAT AGE IS NOT RESTRICTING ANY PERSON TO CARRY ON ANY BUSINESS OR PROFESSION. THERE ARE SO MANY SENIOR CITIZENS STILL CARRYING ON BUSINESS AND /OR PROFESSION. 2. THAT IN THE TEXTILES TRADES ORDERS ARE PLACED ON TELEPHONE BY MENTIONING THE SHADE NUMBER AND/OR DESIGN NUMBER AND EVEN ORDERS ARE PLACED TO YOUR APPELLANT ONLY. 3. IN BROKERAGE/COMMISSION BUSINESS IT IS NOT NECESSARY TO ENTER INTO AGREEMENT. ONLY IN CASE OF AGENCY BUSINESS IN CASE OF BIG COMPANIES PARTIES ENTER INTO WRITTEN AGREEMENT. 4. IT WAS FURTHER OBSERVED BY THE ASSESSING OFFICER THAT LADY IS IX STANDARD. BY OBSERVING THIS HE HAS FORGET THAT IX STANDARD PASS STUDENTS 50 YEARS AGO USED TO HAVING MORE KNOWLEDGE THAN THERE COUNTER PARTS OF PRESENT IX STANDARD STUDENTS. IN OUR COUNTRY THERE ARE MAY MILLIONAIRES WHO ARE NOT EVEN VIII STANDARD PASS. THE PERSON EARNS INCOME ON THE BASIS OF EXPERIENCE HE POSSESSES. THE ENTIRE FAMILY OF SMT. KAMLA MUKIM IS ENGAGED IN THE BUSINESS OF TEXTILES. EVEN HER DAUGHTER-IN-LAW IS ENGAGED IN THIS BUSINESS OF TEXTILES. IN FACT THE FAMILY ATMOSPHERE ENCOURAGES ALL THE MEMBERS TO ITA NO.1203/M/09 A.Y:04-05 4 CARRY ON THEIR OWN BUSINESS. THIS FACT CAN BE JUDGED FROM THE FACT THAT EVEN IN 1999 SMT. KAMLA MUKIM WAS EARNING INCOME FROM BROKERAGE IN TEXTILES TRADE. THE RELATED DOCUMENTS ARE ENCLOSED HEREWITH FOR YOUR PERUSAL. SIGNING IN HINDI IS NOT A CRITERIA THAT A PERSON CANNOT EARN FROM BUSINESS. 5. IT WAS ALSO ALLEGED BY THE ASSESSING OFFICER THA T SHE IS HAVING NO BROKERAGE INCOME FROM OTHER CONCERNS. IF THE ASSESSING OFFICER MIGHT HAVE GONE THROUGH THE PROFIT & LOSS ACCOUNT OF EARLIER YEARS HE WOULD NOT HAVE COMMENTED SO. IT IS ALSO EVIDENT FROM THE PROFIT & LOSS ACCOUNT OF EARLIER YEARS THAT SHE USED TO RECEIVE BROKERAGE FROM MORE THAN ONE FIRMS. IT MAY BE PRESUMED THAT DUE TO HER OLD AGE NOW SHE IS DOING BROKERAGE BUSINESS FOR ONLY ONE FIRM. THIS WILL ALSO BE SUBSTANTIATED BY THE FACT THAT EVEN IN THE NEXT YEA R SHE HAS WORKED FOR ONLY FIRM NAMELY M/S. RATHI TEXTILES. 6. IN THE LAST PARA OF HIS REASONING THE ASSESSING OFFICER STATED THAT TO AVOID HIGHER RATE OF TAX IN THE CASE OF COMPANY THIS BROKERAGE MIGHT HAVE BEEN PAID TO SMT. KAMLA MUKIM AND SIMULTANEOUSLY IN EARLIER PARA IT WAS MENTIONED IN THE ASSESSMENT ORDER THAT SMT. KAMLA DEVI MUKIM HAS NOT INCURRED SUBSTANTIAL EXPENDITURE TO EARN THE BROKERAGE WHICH IS CONTRARY TO THE SUBSEQUENT OBSERVATION MADE BY THE ASSESSING OFFICER . IF THERE WOULD HAVE BEEN ANY TAX PLANNING SMT. KAMLA MUKIM MIGHT HAVE SHOWN HEAVY EXPENSES TO SHOW LESSER INCOME AND SAVE TAX. IN VIEW OF ABOVE DISCUSSION IT IS CLEAR THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS ON SURMISES. THE ASSESSING OFFICER DID NOT SHOW A SINGLE INSTANCE WHICH PROVES THAT THE RATE OF BROKERAGE PAID TO SMT. KAMLA DEVI MUKIM IS HIGHER THAN MARKET RATE OF BROKERAGE TO PAID TO OTHERS. THE LD. CIT(A) AFTER CONSIDERING THE ABOVE HOWEVER OBSERVED THAT SMT. KAMALA DEVI MUKIM HAS NOT BEEN DOING BUSINESS TH OUGH RECORDS OF HER BUSINESS ARE BEING MAINTAINED. HAD SHE BEEN DOIN G REGULAR BUSINESS ONLY TWO PAYMENT IN THE MONTH OF JULY 2004 WOULD NOT HAVE ITA NO.1203/M/09 A.Y:04-05 5 BEEN MADE BUT CONTINUOUS PAYMENT IN THE REGULAR COURSE OF BUSINESS ON THE BASIS OF SALES EFFECTED WOULD HAVE BEEN THERE. THIS INDICATES THAT PROBABILITY OF SMT. KAMALA DEVI MUKIM WORKING FOR ASSESSEE COMPANY FOR WHICH PAYMENT OF RS.1 80 203/- IS NOT THER E. THE BROKERAGE PAYMENT TO SMT. KAMALA DEVI MUKIM IS DISAL LOWABLE AS NON-GENUINE AND ALSO U/S.40A(2)(B) AND ACCORDINGLY HE CO NFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE SU STENANCE OF DISALLOWANCE OF RS.1 80 203/- U/S.40A (2)(B) OF THE A CT. 5. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE ASSESSING OFFICER AND THE LD. CIT(A) FURTHER SUBMITS THAT THE ASS ESSEE IN THE PAPER BOOK HAS FILED ALL THE COPY OF RETURNS P&L ACCOUN T AND BALANCE SHEET. FILED BY SMT. KAMALA DEVI MUKIM FOR THE ASSESSME NT YEARS 1999-2000 2001-02 TO 2005-06 TO SHOW THAT SHE IS REGULARLY SHOWING BROKERAGE INCOME AND OTHER INCOME IN HER RETUR N OF INCOME WHICH HAS ALSO BEEN ACCEPTED BY THE DEPARTMENT. HE FURTH ER SUBMITS THAT ON THE BROKERAGE PAYMENT OF RS.1 80 203/- THE A SSESSEE HAS ALSO DEDUCTED TDS AND DEPOSITED THE SAME TO THE DEPARTMENT. HE FURTHER SUBMITS THAT IN VIEW OF THE ABOVE EVIDENCE THE DISALLOW ANCE OF BROKERAGE OF RS.1 80 203/- MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) BE DELETED. THE RELIANCE WAS ALSO PLACED IN THE CASE OF BINIT CORPORATION VS. ITO REPORTED IN (198 6) 24 TTJ (AHD.) 571 FOR THE PROPOSITION THAT SEC.40A(2) CANNOT BE INVOK ED WHERE TRANSACTION ITSELF IS TREATED AS SHAM ONE OR NOT GENUINE ONE. ITA NO.1203/M/09 A.Y:04-05 6 6. ON THE OTHER HAND THE LD. DR SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER AND IN THE ORDER OF THE LD. CIT(A) THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN DISALLOWING THE CLAIM OF RS.1 80 203/- U/S.40A(2)(B) OF THE ACT. HE THEREFORE SUBMITS THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BE UPHELD. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT THE DISALLOWANCE OF RS.1 80 203/- BEING B ROKERAGE PAID TO SMT. KAMALA DEVI MUKIM PROPRIETOR OF M/S. R. RAVIN DRA AND CO. AND MOTHER OF SHRI RAVINDRA MUKIM DIRECTOR OF THE COMPAN Y WAS MADE BY THE ASSESSING OFFICER U/S.40A(2)(B) OF THE ACT. UNDER SECTIO N 40A(2)(A) OF THE ACT THE EXPENDITURE INCURRED BY THE ASSESSEE MAY BE DISALLOWED BY THE ASSESSING OFFICER IF HE CONSIDERS THE SAME TO BE EXCESSIVE OR UNREASONABLE HAVING REGARD TO :- (A) THE FAIR MARKET VALUE OF THE GOODS/SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE; OR (B) THE LEGITIMATE BUSINESS NEEDS OF THE ASSESSEE S BUSINESS OR PROFESSION; OR (C) THE BENEFIT DERIVED BY OR ACCRUING TO THE A SSESSEE FROM THE PAYMENT. 8. IN THE CASE BEFORE US THE ASSESSEE HAS FILED EVIDENCE THA T SMT. KAMALA DEVI MUKIM IS REGULARLY SHOWING BROKERAGE INCOM E NOT ONLY FROM ASSESSEE COMPANY BUT ALSO FROM OTHER COMPANIES DURING THE ASSESSMENT YEARS 1999-2000 2001-02 TO 2005-06. THE ASSESSE E HAS ALSO PROVED THAT THE ABOVE COMMISSION OF RS.1 80 203/- W AS PAID TO SMT. KAMALA DEVI MUKIM BY CHEQUES AFTER DEDUCTING TDS OF RS.9 010/- WHICH WAS DULY DEPOSITED IN THE BANK ON 31.5 .2004. IT IS NOT THE CASE OF THE REVENUE THAT THE SAID BROKERAGE PA ID BY THE ASSESSEE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO (A) T HE FAIR ITA NO.1203/M/09 A.Y:04-05 7 MARKET VALUE OF THE GOODS/SERVICES OR FACILITIES FOR WHI CH THE PAYMENT IS MADE; OR (B) THE LEGITIMATE BUSINESS NEEDS OF THE ASSE SSEES BUSINESS OR PROFESSION; OR (C) THE BENEFIT DERIVED BY OR ACCRUING TO THE ASSESSEE FROM THE PAYMENT. IT IS ALSO NOT THE CASE OF REVE NUE THAT THE RECEIPT OF BROKERAGE COMMISSION WAS DENIED BY SMT. KAMAL A DEVI MUKIM OR NO SUCH BROKERAGE WAS PAID TO HER. MERELY BE CAUSE SMT. KAMALA DEVI MUKIM IS AN OLD LADY HAVING EDUCATION QUA LIFICATION ONLY UPTO IX STANDARD DOES NOT MEAN THAT SHE CANNOT CARRYOU T ANY BUSINESS AS THERE IS NO SUCH BAR UNDER THE ACT INASMUCH AS THE ASSESSEE'S SUBMISSION THAT IN TEXTILE TRADE ORDERS ARE PLACED ON TELEPHONE BY MENTIONING THE SHADE NUMBER OR / AND DE SIGN NUMBER WAS NOT FOUND TO BE FALSE OR UNTRUE. IN THIS VIEW OF THE MATTER AND KEEPING IN VIEW THAT THE DOCUMENTARY EVIDENCE FILED B Y THE ASSESSEE IN THE CASE OF PAYEE I.E. SMT. KAMALA DEVI MUKIM HAS NOT BEEN CONTROVERTED BY THE REVENUE WE ARE OF THE VIEW THAT NO CASE IS MADE OUT BY THE ASSESSING OFFICER TO DISALLOW BROKERAGE RS.1 80 203/- UNDER THE PROVISIONS OF SEC.40A(2)(A) OF THE ACT AND ACCORDING LY WE DELETE THE DISALLOWANCE OF RS.1 80 203/- MADE BY THE ASSESSING OF FICER U/S.40A(2)(B) AND SUSTAINED BY THE LD. CIT(A). THE GRO UNDS TAKEN BY THE ASSESSEE ARE THEREFORE ALLOWED. 9. IN THE RESULT ASSESSEE'S APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.12.2010. SD/- SD/- (RAJENDRA SINGH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 22.12.2010. JV. ITA NO.1203/M/09 A.Y:04-05 8 COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.