Asst. Comm.of Income-tax, Circle-9, Pune v. Kishor Pumps Pvt. Ltd.,, Pune

ITA 1271/PUN/2011 | 2002-2003
Pronouncement Date: 19-07-2013 | Result: Dismissed

Appeal Details

RSA Number 127124514 RSA 2011
Assessee PAN AABCK0619B
Bench Pune
Appeal Number ITA 1271/PUN/2011
Duration Of Justice 1 year(s) 9 month(s) 9 day(s)
Appellant Asst. Comm.of Income-tax, Circle-9, Pune
Respondent Kishor Pumps Pvt. Ltd.,, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 19-07-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 19-07-2013
Date Of Final Hearing 13-12-2012
Next Hearing Date 13-12-2012
Assessment Year 2002-2003
Appeal Filed On 10-10-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE: SHRI G. S. PANNU ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO. 1199 / P N/ 20 11 ASSESSMENT YEAR : 2002 - 03 KISHOR PUMPS PVT. LTD. A/13 - H MI DC PIMPRI PUNE VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE - 8 AKURDI PUNE (APPELLANT) (RESPONDENT) PAN NO. AABCK0619B ITA NO. 1271 /PN/20 11 ASSESSMENT YEAR : 2002 - 03 ASSTT. COMMISSIONER OF INCOME TAX CIRCLE - 9 AKURDI PUNE VS. KISHOR PUMPS P VT. LTD. A/13 - H MIDC PIMPRI PUNE (APPELLANT) (RESPONDENT) PAN NO. PAN NO. AABCK0619B A SSESSEE BY: SHRI SUNIL PATHAK RE VENUE BY: SHRI Y.K. BHASKAR DATE OF HEARING : 15 - 05 - 2013 DATE OF PRONOUNCEMENT : 19 - 07 - 2013 ORDER P ER R.S. PADVEKAR JM : - THESE TWO CROSS APPEALS ONE BY THE ASSESSEE AND ANOTHER BY THE REVENUE ARE FILED CHALLENGING THE IMPUGNED ORDERS OF THE LD. CIT(A) - V PUNE DATED 20 - 07 - 2011 FOR THE A.Y. 2002 - 03. THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS: 1. THE LEARNED C.I.T (APPEALS) HAS ERRED IN LAW AND FACTS IN NOT ALLOWING THE COMMISSION AMOUNTING TO RS.3 79 861/ - OUT OF THE TOTAL COMMISSION PAID OF RS.43 41 837/ - . HE MAY PLEASE BE DIRECTED TO ALLOW THE SAME. 2. THE LEARNED C.I.T (APPEALS) HAS FAILED TO APPRECIATE TH E FACT THAT THERE WAS A SALE TO THE TWO PARTIES VIZ. M/S. LARSEN & TOUBRO AND M/S. VISHWA CONSTRUCTIONS DURING THE YEAR UNDER REFERENCE AND THE FACT WAS VERY APPARENT FROM THE DETAILS OF SALES FURNISHED DURING THE COURSE OF ASSESSMENT AS WELL AS DURING THE APPELLATE PROCEEDINGS. 3. THE LEARNED C.I.T (APPEALS) HAS TOTALLY ERRED IN DISALLOWING THE COMMISSION OF RS.3 79 861/ - ON THE GROUND THAT THE APPELLANT HAS 2 ITA NOS.1199 & 1271/PN/2011 KISHORE PUMPS PVT. LTD. PUNE NOT STATED ANYTHING ON THIS ASPECT IN THE APPELLATE PROCEEDINGS WHEN ALL DETAILS WERE DULY FURNISHED. 2. THE REVENUE HAS TAKEN FOLLOWING GROUNDS IN ITS APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.39 61 976/ - ON ACCOUNT OF COMMISSION PAID TO SISTER CONCERN M/S. SHALIVAHANA ENGINEE RS PVT. LTD. (SEPL). 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.8 95 793/ - ON ACCOUNT OF COMMISSION PAID TO SEPL AGAINST SALES MADE TO GOVERNMENT COMPANIES AND PSU BEING AGAINST THE GOVT. POLICY. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT( A) ERRED IN DELETING THE DISALLOWANCE OF RS.6 64 117/ - U/S. 40(A)(2)(B) ON ACCOUNT OF EXCESSIVE COMMISSION WITH REFERENCE TO THE CORRESPONDING SALES. 3. THE ISSUE IN CONTROVERSY IS IN RESPECT OF THE PAYMENT OF COMMISSION TO THE SISTER CONCERN M/S. SHALIVAHANA ENGINEERS PVT. LTD. (SEPL) WHICH IS A REPEATED ISSUE ARISING IN THE PRECEDING YEARS. I N THE PRESENT ASSESSMENT YEAR T HE ASSESSING OFFICER HAS MADE THE TOTAL DISALLOWANCE IN RESPECT OF THE COMMISSION DEBITED BY THE ASSESSEE WHICH WAS PAID TO SEPL AS UNDER: SL. NO. PARTICULARS AMOUNT 1 COMMISSION PAID TO 12 PARTIES DISALLOWED U/S. 37(1) RS.43 41 837/ - 2 COMMISSION ON ACCOUNT OF SALES EFFECTED TO GOVERNMENT COMPANIES DISALL OWED U/S. 37(1) RS.8 95 793/ - 3 COMMISSION DISALLOWED U/S. 40A(2)(B) RS.6 64 117/ - TOTAL RS.59 01 747/ - 4. THE FACTS PERTAINING TO THE ISSUE IN CONTROVERSY ARE THAT THE ASSESSEE IS IN BUSINESS OF MANUFACTURING OF CENTRIFUGAL PUMPS REQUIRED FOR INDUS TRIAL APPLICATIONS. IT ALSO MANUFACTURES CHEMICAL PROCESS PUMPS VERTICAL SUBMERGED PUMPS DRY MOTOR SUBMERSIBLE SEWAGE PUMPS AND NON - CLOGG PUMPS REQUIRED FOR DIFFERENT APPLICATIONS FOR THE INDUSTRIAL AND NON - INDUSTRIAL USE . I N THE A.Y. 2002 - 03 T HE ASSE SSEE HAS DEBITED SALES COMMISSION OF RS.13 665 475/ - WHICH WAS PAID TO M/S. 3 ITA NOS.1199 & 1271/PN/2011 KISHORE PUMPS PVT. LTD. PUNE SHALIVAHAN ENGINEERS PVT. LTD (SEPL) WHICH IS THE SISTER CONCERN OF THE ASSESSEE. THE ASSESSING OFFICER ISSUED ENQUIRY LETTERS AND ALSO SUMMONS TO 16 PARTIES FOR VERIFICATION OF T HE GENUINENESS OF THE COMMISSION PAYMENT. THE TWELVE ( 12 ) PARTIES RESPONDED TO THE ASSESSING OFFICER AS PER THE DISCUSSION MADE IN PAGE NO. 9 OF THE ASSESSMENT ORDER. 5. THE PARTIES HAVE STATED THAT THEY HAVE MADE THE PURCHASE DIRECTLY FROM THE ASSESSE E COMPAN Y AND NOT F ROM ITS MARKET AGEN T I.E. SEPL . THEY HAVE ALSO STATED BEFORE THE ASSESSING OFFICER THAT THE NEGOTIATIONS WERE DIRECTLY MADE WITH THE ASSESSEE COMPAN Y INCLUDING DISCUSSION OF TECHNICAL AND ON COMMERCIAL ASPECTS WITH THE T ECHNICAL/ E NGINEE R ING PERSONNEL. IT WAS ALSO STATED THAT ALL THE ADVANCES AND OTHER PAYMENTS WERE MADE TO KPPL (ASSESSEE) AND AFTER SALES SERVICES ARE LOOKED AFTER BY THE ASSESSEE COMPAN Y ONLY. 6. THE ASSESSEE WAS CONFRONTED WITH THE ABOVE FINDINGS REVEALED FROM THE EN QUIRIES . THE ASSESSEE EXPLAINED THAT THE PARTI ES HAVE MENTIONED THE NAMES OF T ECHNICAL PERSONNEL WITH WHOM THEY HAD DISCUSSION S AND ALL OF THE M WERE EMPLOYEES OF SEPL ONLY. THE ASSESSEE ALSO STATED THAT THE PARTIES HAVE NO KNOWLEDGE IN RESPECT OF THE ARR ANGEMENT BETWEEN THE ASSESSEE I.E. KPPL AND ITS SISTER CONCERN SEPL TO WHICH THE SALES COMMISSION IS PAID. THE ASSESSEE ALSO STATED THAT THE SAID ARRANGEMENT IS THERE FOR ALMOST 10 YEARS AND ACCORDING TO WHICH SEPL WAS AUTHORIZED TO REPRESENT THE ASSESSEE AND SIGN THE PAPERS RELATING TO THE QUOTATION S ORDERS ETC. IN THE NAME OF K ISHORE SO AS TO INCREASE THE GOODWILL OF THE SAID NAME IN THE MARKET. THE ASSESSEE ALSO CLAIMED THAT ALL THE CORRESPONDENCE WAS MADE BY THE EMPLOYEES OF SEPL ON BEHALF OF THE A SSESSEES COMPANY AND HENCE THE CUSTOMERS WERE UNDER IMPRESSION THAT THEY WERE DEALING WITH THE ASSESSEE DIRECTLY WITHOUT INTERFERENCE OF SEPL. 4 ITA NOS.1199 & 1271/PN/2011 KISHORE PUMPS PVT. LTD. PUNE 7. IT IS SEEN THAT IN THE A.YS. 1995 - 96 1996 - 97 1997 - 98 AND 2001 - 02 THE COMMISSION PAYMENTS MADE TO THE SE PL WAS DISALLOWED BY THE ASSESSING OFFICER BUT WAS ALLOWED BY THE CIT(A) AND THE TRIBUNAL HAS CONFIRMED THE ORDER S OF THE CIT(A) S AVE ONLY THE DISALLOWANCE OF COMMISSION PAID AGAINST THE SALE S MADE TO GOVERNMENT COMPAN IES WAS UPHELD BY THE CIT(A) IN THE A .Y. 2001 - 02. AS OBSERVED BY THE ASSESSING OFFICER OUT OF 12 PARTIES 2 PARTIES HAVE EVEN DENIED TO HAVE MADE ANY PURCHASE S DURING THE YEAR FROM KPPL AND THE DETAILS OF THE SAID PURCHASES ARE GIVEN IN PARA NO. 4.5 OF THE ASSESSMENT ORDER AND COMMISSION REL ATED TO THOSE 2 AMOUNTS WORKED OUT TO 3 79 861/ - WHICH IS STATED TO BE NOT GENUINE. THE ASSESSING OFFICER PROCEEDED TO MAKE THE DISALLOWANCE ALSO ON ANOTHER FACT THAT THE ASSESSEE HAS SEPARAT ELY DEBITED MARKET DEVELOPMENT EXPENDITURE OF RS.17 30 577/ - ALS O. SO FAR AS SALES MADE TO SEPL AND THE GOVERNMENT COMPANIES IN THE OPINION OF THE ASSESSING OFFICER THERE WAS NO NEED FOR ANY SALES SERVICES AS RATES ARE FI XED AND HE THEREFORE DISALLOWED RS. 8 95 7 5 3/ - IN RESPECT OF THE SALES AMOUNT PERTAINING TO THE PSU/GOVERNMENT COMPANIES. IN RESPECT OF REMAINING COMMISSION OF RS.84 27 885/ - PAID TO SEPL T H E ASSESSING OFFICER MADE THE DISALLOWANCE PARTLY CONSIDERING IT TO BE EXCESSIVE. THE ASSESSING OFFICER WORKED OUT THE AVERAGE RATE OF COMMISSION WHICH WAS 12.8 8% WITH REFERENCE TO THE CORRESPONDING SALES. THE ASSESSING OFFICER APPLIED THE PROVISIONS OF SEC. 40A(2)(B) BY OBSERVING THAT THE COMMISSION @12.88% WAS EXCESSIVE AND A REASONABLE COMMISSION OF 5% WAS TO BE ALLOWED THAT RESULTED INTO THE FURTHER DISALLOW ANCE OF RS.6 64 117/ - . 8. IN SUM AND SUBSTANCE THE TOTAL DISALLOWANCE MADE BY THE ASSESSING OFFICER TOWARDS SALES COMMISSION PAID TO SEPL WAS TO THE EXTENT OF RS.59 01 747/ - . THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD. CIT(A). THE LD. CIT(A) SUSTAI NED THE DISALLOWANCE TO THE EXTENT OF RS.3 79 861/ - WHICH WAS IN RESPECT OF 2 PARTIES WHO HAVE DENIED HAVING 5 ITA NOS.1199 & 1271/PN/2011 KISHORE PUMPS PVT. LTD. PUNE MADE ANY SALES TO THE ASSESSEE AND BALANCE DISALLOWANCE WAS DELETED. THE OPERATIVE PART OF FINDINGS OF THE LD. CIT(A) IS AS UNDER: 9. I HAVE PERUSED THE DECISION OF THE TRIBUNAL IN APPELLANTS OWN CASE. IT IS NOTICED THAT THE TRIBUNAL HAS DISCUSSED AND TAKEN INTO CONSIDERATION ALL THE DISCREPANCIES AND POINTS NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER FOR A.Y. 2002 - 03 REGARDING THE INVOLVEMENT OF SEPL IN ALL THE SALES TRANSACTIONS. IT WAS NOTICED THAT SEPL WAS AUTHORIZED TO USE LETTER HEAD OF THE ASSESSEE AND THE INVOLVEMENT OF TECHNICAL PERSONNEL WERE THOSE OF SEPL. FURTHER IT WAS NOTED THAT SEPL WAS NOT MERELY A MEDIATOR BUT AC TUALLY RENDERED TECHNICAL SERVICES ON BEHALF OF THE APPELLANT. THE TRIBUNAL THUS UPHELD THE CI T(A)'S ORDER FOR BOTH THESE YEARS ALLOWING THE PAYMENT OF COMMISSION. MOREOVER THE TRIBUNAL ALSO DID NOT CONSIDER AS PROPER THE RESTRICTION OF COMMISSION ON AN ADHOC BASIS APPLYING THE PROVISIONS OF SECTION 40A(2)(B) OF THE I.T. ACT. FOR A.Y. 98 - 99 THE ENTIRE COMMISSION HAD BEEN DISALLOWED; WHICH WAS ALLOWED BY THE ITAT. FOR A.Y. 2001 - 02 THE RESTRICTION OF COMMISSION TO 2% IN RESPECT OF PARTIES WHO HAD DENIED INVOLVEMENT OF SEPL OR ITS EMPLOYEES AND TO 5% TO PARTIES WHO HAD CONFIRMED THE ROLE OF SEPL WAS HELD TO BE INVALID BY THE TRIBUNAL. IT WAS HELD THAT THERE WAS NO CASE OF DISALLOWANCE U/S.40A(2)(B) AND SUCH RESTRICTION OF THE COMMISSION AMOUNT PAYMENT WAS IMPROPER. MOREOVER THE TRIBUNAL ALSO ALLOWED THE PAYMENT OF COMMISSION BY THE APPELLANT TO M/S. SEPL FOR SALES EFFECTED TO THE GOVERNMENT COMPANIES/PSUS HOLDING THE SAME TO BE ALLOWABLE. 10. THEREFORE FOLLOWING THE RATIO OF ITAT P UNES DEC ISION DATED 24/11/2010 IN APPELLANT'S OWN CASE FOR THE PRECEDING YEARS THE DISALLOWANCE OF COMMISSION U/S.40A(2)(B) FOR EXCESSIVE PAYMENT BEING RS.6 64 117/ - AND FOR SALES EFFECTED THROUGH SEPL TO GOVERNMENT COMPANIES AMOUNTING TO RS.8 95 793/ - IS DIRECTE D TO BE DELETED. SO FAR THE REMAINING AMOUNT OF RS.43 41 837/ - IS CONCERNED WHICH IS ON ACCOUNT OF DISALLOWANCE AFTER DIRECT ENQUIRIES IT HAS BEEN POINTED OUT BY THE ASSESSING OFFICER IN PARA 4.5 OF THE ASSESSMENT ORDER THAT TWO PARTIES HAVE DENIED TO H AVE MADE ANY PURCHASES DURING THE YEAR FROM THE APPELLANT. THESE TWO PARTIES ARE M/S. LARSEN & TOUBRO AND M/S.VISHWA CONSTRUCTION THE APPELLANT HAS NOT STATED ANYTHING ON THIS ASPECT IN THE APPELLATE PROCEEDINGS. THEREFORE DISALLOWANCE OF COMMISSION IN R ESPECT OF THESE PARTIES AMOUNTING TO RS.3 79 861/ - IS HEREBY SUSTAINED OUT OF THE TOTAL DISALLOWANCE OF RS.43 41 837/ - AND THE 6 ITA NOS.1199 & 1271/PN/2011 KISHORE PUMPS PVT. LTD. PUNE BALANCE IS DIRECTED TO BE DELETED FOLLOWING THE RATIO OF ITAT PUNE BENCH'S DECISION IN APPELLANT'S OWN CASE. ACCORDINGLY THE GR OUNDS OF APPEAL WILL HAVE TO BE TREATED AS PARTLY ALLOWED. 9. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THIS IS A REPETITIVE ISSUE COMING IN PRECEDING YEARS. THE ISSUE WAS ALSO CONSIDERED BY THE TRIBUNAL A FTER A.Y. 2001 - 02 . T HE LD. CIT(A) HAS ALREADY CONSIDERED THE DECISION OF THE TRIBUNAL IN ASSESSEE OWN CASE FOR A.YS. 1997 - 98 AND 2001 - 02. THE FACTS AND REASONS ARE SAME AT THE END OF THE ASSESSING OFFICER. THE TRIBUNAL HAS ALREADY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. W E THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) FOR DELETING THE ADDITIONS IN RESPECT OF THE DISALLOWANCE OF COMMISSION MADE U/S. 40A(2)(B) ON ALLEGED EXCESS PAYMENT OF RS.6 64 117/ - COMMISSION ON SALES MADE TO GOVERNMENT COMPANIE S /PSU OF RS.8 95 793/ - . I N RESPECT OF THE BALANCE AMOUNT OF RS. 43 41 837/ - T WO PARTIES I.E. M/S. LARSEN & TOUBRO AND M/S. VISHWA CONSTRUCTION HAV E DENIED MADE ANY PURCHASE AT ALL FROM THE ASSESSEE. THE LD CIT(A) HAS SUSTAINED THE DISALLOWANCE IN RESPECT OF THE SALES COMMISSION PERTAINING TO THE ALLEGED SALES MADE TO THOSE PARTIES WHICH HAS BEEN WORKED OUT TO RS.3 79 861/ - . I N OUR OPINION THE LD CIT(A) HAS FOLLOWED THE TRIBUNAL ORDERS IN ASSESSEE S OWN CASE IN THE PRECEDING YEARS. WE THEREFORE FIND N O REASON TO INTERFERE WITH THE SAME TO THE EXTENT OF THE ADDITION DELETED . WE THEREFORE DISMISS THE GROUND S TAKEN BY THE REVENUE. 10. SO FAR AS APPEAL OF THE ASSESSEE IS CONCERNED THE LEARNED COUNSEL SUBMITS THAT THERE IS LOT OF CONFUSION IN THE THEORY OF THE ASSESSING OFFICER . T HE MATERIAL RELIED ON BY THE ASSESSING OFFICER WAS ALSO NOT CONFRONTED TO THE ASSESSEE. HE PLEADED FOR RESTORING THE ISSUE OF THE DISALLOWANCE OF RS.3 79 861/ - TO THE FILE OF THE ASSESSING OFFICER. THE LD. DR HAS NO OBJECTION TO THE EXTENT OF RESTORING THE ISSUE OF COMMISSION PAYMENT OF THE TWO PARTIES I.E. M/S. LARSEN & TOUBRO AND 7 ITA NOS.1199 & 1271/PN/2011 KISHORE PUMPS PVT. LTD. PUNE M/S. VISHWA CONSTRUCTION . W E ACCORDINGLY SET ASIDE THE ORDER OF THE LD. CIT(A) ON THE SAID DISALLOWANCE AND RESTORE THE ISSUE TO THE FILE OF THE A SSESSING OFFICER FOR FRESH ADJUDICATION. 11. IN THE RESULT THE REVENUES APPEAL IS DISMISSED AND THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S . PRONOUNCED IN THE OPEN COURT ON 19 - 07 - 20 1 3 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE DATED : 19 TH J ULY 20 1 3 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - V PUNE 4 THE CIT - V PUNE 5 THE DR ITAT B BENCH PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE