M S Jhawar International Surat v. The Income Tax Officer Ward 2 1 Surat

In The Income Tax Appellate Tribunal Ahmedabad Bench A Ahmedabad Before Shri N S Saini Accountant Member And Shri Mahavir Singh Judicial Member Ita No 1938 2015 Ahd 2008 Assessment Year 2004 05 Date Of Hearing 3 12 09 Drafted 6 01 10 M S Jhawar International 823 Road No 8 Gidc Sachin Surat Pan No Aacfj 22540 E Acit Circle 2 Room No 110 1 St Floor Aaykar Bhavan Majura Gate Surat V S V S Income Tax Officer Ward 2 1 Surat M S Jhawar International 13 1 Doctor Wadi Supreme House Nr Krishna Petrol Pump Surat Appellant Respondent Ita No 1941 2019 Ahd 2008 Assessment Year 2004 05 Supreme India Overseas Corporation 823 2 Road No 8 G I D C Sachin Surat Pan No Aajfs 5561 K Acit Circle 2 Room No 110 1 St Floor Aaykar Bhavan Majura Gate Surat V S V S Income Tax Officer Ward 2 1 Surat M S Supreme India Overseas Corporation 823 2 Road No 8 Gidc Sachin Surat Appellant Respondent Assessee By Shri R K Malpani Ca Revenue By Shri Rajeev Agarwal Cit Dr O R D E R Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 2 Per Mahavir Singh Judicial Member These Four Cross Appeals By Different Assessee And The Revenue Are Arising Out Of The Order Of Commissioner Of Income Tax App Eals Ii Surat In Appeal No Cas Ii 435 436 06 07 Dated 28 02 2008 The Asse Ssments Were Framed By The Income Tax Officer Ward 2 1 Surat U S 143 3 Of The Income Tax Act 1961 Hereinafter Referred To As The Act Vide His Dif Ferent Orders Of Even Date 29 12 2006 For The Same Assessment Year I E Ay 2004 05 First We Will Take Up Assessees Appeal In Ita No 1 938 Ahd 2008 2 The First Issue In This Appeal Of The Assessee Is As Regards To Disallowance Of Deduction U S 80 Hhc Of The Act For This The Asse Ssee Has Raised The Following Ground No 1 2 1 That The Honble C I T A Has Erred In Upholdi Ng The Disallowance Rejection Of Deduction U S 80 Hhc Of Th E I T Act 1961 The Act By Wrongly Interpreting The Amendments Made By The Taxation Laws Amendment Act 2005 The Amendment Act 2 That The Honble C I T A Has Erred In Upholdin G The Nil Deduction U S 80 Hhc Of The Act By Mis Interpreting The Provi Sion Of The Amendment Act 3 At The Outset Ld Counsel For The Assessee Stat Ed That This Issue Is Now Adjudicated By The Special Bench Of This Tribunal I N The Case Of Topman Exports V Ito 2009 318 Itr At 87 Mum Whereby It Is Held That Only The Profit Element Of The Sale Proceeds Of The Depb Is To Be Excluded For The Purposes Of Computation Of Deduction U S 80 Hhc Of The Act And Accordingly Whet Her The Assessees Case Falls Under The Second Third And Forth Proviso Inserted By The Taxation Act Laws Amendment Act 2005 W R E F 1 4 1998 Or Not Th E Ld Counsel For The Assessee Stated That This Issue Needs Re Examination In The Light Of Mumbai Special Bench Of This Tribunal In The Case Of Topman Exports Supra The Ld Cit Dr Conceded The Position And Stated That This Issue Can Be Remitted Back To The File Of The Assessing Officer For Re Examination Of This Issue In Entiret Y After Considering The Case Law Of Topman Exports Supra 4 We Find That This Issue Has Been Adjudicated By The Mumbai Special Bench Of This Tribunal In The Case Of Topman Exports Supra The Principle Laid Down In That Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 3 Case Should Be Considered And The Issue Be Reexamin Ed Accordingly By The Assessing Officer Accordingly We Set Aside This Issue To The File Of The Assessing Officer And Allowed For Statistical Purposes 5 The Next Issue In This Appeal Of The Assessee Is Against The Order Of Cit A In Sustaining The Addition Of Rs 1 17 73 210 Of Bus Iness Expenditure Of Job Work Charges For This The Assessee Has Raised The Foll Owing Ground No 3 3 That On Facts And In The Circumstances Of Case The Honble C I T A Has Erred In Sustaining Addition Of Rs 1 17 73 210 Of Legitimate Business Expenditure Of Job Work Charges 6 We Have Heard The Rival Contentions And Gone Thr Ough The Facts And Circumstances Of The Case The Brief Facts Leading To The Above Issue Are That The Assessee Is Engaged In The Business Of Manufacture And Export Of Fabrics During The Course Of Assessment Proceedings It Was Noticed By The A O That The Total Job Charges Claimed To Have Been Paid By The Assessee I S Rs 2 62 20 058 The A O Further Noticed That The Above Job Charges Also Inc Lude The Payments Made To The Following Parties 1 M S Vikram Job Works Rs 27 59 858 2 M S Shalini Screen Printing Works Rs 78 34 323 3 M S Pratika Hand Printin G Works Rs 11 79 029 Total Rs 1 17 73 21 0 It Was Found By The A O That The Parties Mentioned At Sl No 1 And 2 Were Assessed With The Same A O Whereas The Party Mentioned At S L No 3 Was Assessed With Ito Ward 9 1 Surat The Cases Of All The Three Partie S Were Also Under Scrutiny Assessments For A Y 2004 05 During The Course Of Scrutiny Assessment Proceedings Of These Three Job Workers It Was Notic Ed That These Parties Failed To Prove The Fact That They Had Actually Done Any Job Work They Failed To Provide The Names And Addresses Of The Persons Who Have Done Ac Tual Job Work The Outgoing Fund Movement From The Bank Accounts Of These Parti Es Led Nowhere And These Job Work Parties Failed To Submit The Real Identities O F The Persons To Whom They Have Transferred The Funds On The Basis Of Above Facts The A O Reached To The Conclusion That The Job Charges Bills Issued By These Three Pa Rties Are Not In Respect Of Any Actual Job Work Done By Them But Are Accommodative Bills Provided By These Parties The A O Further Presumed That The Amounts Paid By The Assessee To These Job Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 4 Parties Must Have Returned Back To The Assessee In Such A Manner That Little Evidence Can Be Found In This Respect The A O Acc Ordingly Disallowed The Job Charges Paid Of Rs 1 17 73 210 To Above Referred Three Parties 7 Before The C I T A It Was Contended That The Assessee Has Furnished All The Relevant Details And Evidences To The A O During A Ssessment Proceedings The Evidences Furnished To A O During Assessment Proce Edings Include The Following Documentary Evidences Job Charges Invoices Raised By Job Parties Bank Statements Evidencing Payments To The Job Par Ties By Account Payee Cheques Copies Of Tds Certificates In Respect Of Tds Deduc Ted U S 194 C From These Job Parties Confirmation From These Job Parties That They Have Done Job Work Of Value Addition And Received Payment For It Ledger Account Copy Of These Job Parties It Was Argued That The Assessee Is An Exporter Of V Alue Added Textile Fabrics And Purchased Cloth From Market And Got Value Addition Work Done On Job Work Basis And Then Exported The Same Following Value Addition Wo Rk Was Claimed To Have Got Done From These Job Work Parties Lace Work Chamki Work Bindi Work Gotan Work Glass Work Hira Moti Work Many More Fancy And Decorative Value Addition Work Generally Done On These Fabrics It Was Claimed That Above Job Work Are Very Common Feature In Textile Industry In Surat The Assessee Assigned These Works To The Job Parties Engaged In This Business These Job Parties Get The Work Done From A Number Of Sub Job Workers Who Are Individuals Small Groups Families Etc Th Is Is Home Industry Of The City These Sub Job Workers Are Small Individuals Group Of Individuals Families Etc Who Are Doing Work As Per Instructions Of Job Work Part Ies The Assessee Does Not Know Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 5 These Sub Job Workers As They Are Scattered Over Th E City And Assessee Has No Contact With Them Assessees Contract Was With His Job Work Parties Contractors In Respect Of These Contractors Complete Documentary Evidences As Mentioned Above Were Furnished To The A O The Payments Were Made B Y A C Payee Only Cheques After Deducting Due T D S And There Is No Finding That Any Portion Of These Payments Returned Back To The Assessee The A O Himself Has Mentioned That Outgoing Funds From The Bank Accounts Of These Contracts Lead Nowh Ere And There Is No Evidence To The Effect That Any Portion Of The Payments Made To These Contractors Returned Back To The Assessee All The Three Parties Were Assesse D To Tax And Two Out Of Them Were Assessed With The Same A O Amounts Paid By The Ass Essee As Job Charges Were Included In Their Job Charges Income In Such A Sit Uation Assessee Has Discharges His Onus By Producing Sufficient Details Evidences And Identity Of His Contractors It Was Further Claimed That The Sub Job Workers Were N Ever In The Contact Of The Assessee As Lot Of Secrecies Were Maintained In Thi S Line It Was Further Contended That The The Price Realization Itself Proves That T He Work Was Done The Average Annual Export Sales Rate Is Rs 71 71 Per Mtr As A Gainst Raw Material Cost Of Rs 52 14 Per Mtr If Depb Is Reduced From Raw Material Cost The Average Input Cost Works Out To Be Rs 44 80 Per Mtr As Against The S Ales Realization Of Rs 71 71 Per Mtr It Was Argued That Such A High Realization Can Not Be Achieved Without The Value Addition Work Thus Sales Realization Itself Prove That The Value Was Got Done On The Fabrics In Such A Situation Merely Because These C Ontractors Could Not Furnish Certain Details In Their Assessment Proceedings Th E Expenditure Cannot Be Held To Be Non Genuine In The Hands Of The Assessee Assessee Had Proved His Source Job Work Parties And Cannot Be Asked To Prove The Sour Ce Of Source The Cit A However Did Not Agree With The Arguments Of The As Sessee And Upheld The Disallowance It Was Accepted By The Cit A That In The Case Of Assessee The Identity Of All The Parties Were Established As They Were Al L Assessed To Tax However As In Their Cases They Failed To Prove That They Have Act Ually Done The Job Work The A O Was Correct In Disallowing The Job Charges In The H And Of Assessee As Regards The Assessees Claim That The Payments Were Made To The Se Job Parties By A C Payee Only Cheques And There Was Not An Iota Of Finding By The A O That Any Portion Of These Payments Returned Back To The Assessee It Wa S Concluded By The Cit A That There Was No Necessity To Reach That Level Of Evide Nce When Basic Evidence Showed Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 6 That The Expenditure Was Bogus By Mentioning These Reasons The Cit A Confirmed The Addition Aggrieved The Assessee Came In Secon D Appeal Before Us 8 Before Us The Learned Counsel For The Assessee R E Iterated The Same Arguments As Were Made Before Lower Authorities Th E Ld Counsel For The Assessee Also Argued That Identical Addition Made In The Cas E Of A Group Concern Of Assessee Has Been Deleted By Honble D Bench Of Itat Ahme Dabad In The Case Of Avinash M Jhawar Ita No 1939 Ahd 2008 He Therefore Contended That Appeal Of The Assessee On This Issue Is Covered In His Favour By The Order Of The Tribunal In Above Case On The Other Hand Learned D R Placed Relian Ce On The Orders Of Lower Authorities And Re Iterated The Same Arguments As A Re Mentioned In The Assessment Order And Order Of The Cit A 9 We Find That Exactly On Same Facts The Tribunal In Assessees Own Case In Ita No 1939 Ahd 2008 Dated 26 06 2009 Has Allowed The Claim By Holding As Under 7 We Have Heard The Rival Contentions And Gone Th Rough The Facts And Circumstances Of The Case We Have Also Perused The Case Records Including The Assessment Order As Well As The Order Of The Ci T A We Have Also Perused The Paper Book Furnished By The Assessee W E Find That The Assessee Is An Exporter Of Value Added Textile Fabrics We F Ind That The Average Annual Export Sales Rate Is Rs 72 50 Per Mtr As Against R Aw Material Cost Of Rs 51 74 Per Mtr If D E P B Is Reduced From Raw Material Cost The Average Input Cost Works Out To Be Rs 43 70 Per Mtr And Sales Realiza Tion Is R 72 50 Per Mtr Such A High Realization Cannot Be Achieved Without Value Addition Work The Sales Realization Itself Proves That The Value Addi Tion Work Done On These Fabrics On Behalf Of The Assessee We Further Find That The Following Value Addition Work Was Got Done From This Job Work Party Lace Work Chamki Work Bindi Work Gotan Work Glass Work Hira Moti Work Many More Fancy And Decorative Value Addition Work Generally Done On These Fabrics We Find From The Nature Of Business That The Job Wo Rk Is Very Common Feature Of Textile Industry In Surat The Assessee Assigned These Work Of Job Parties Engaged In This Business And These Job Parties Get The Work Done From Number Of Sub Job Workers Who Are Individuals Smal L Groups Families Etc This Is The Home Industry Of The City Of Surat The Se Job Parties Assist The Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 7 Assessee By Consulting The Type Of Value Addition W Ork And Fashion Going On In The Market They Are Latest In This Field And Cr Eate The Ideas They Lift The Goods From The Premises Of The Assessee And Get The Value Addition Work Done From Different Sub Job Workers In The City Th Ese Job Workers Are In Unorganized Sector They Are Small Individuals Gro Up Of Individuals Families Etc Who Are Doing Work As Per Instruction Of Job W Ork Parties The Assessee Does Not Know These Sub Job Workers As They Are Sca Ttered Over The City Of Surat And He Has No Contact With Them We Further F Ind That The Assessee During Assessment Proceedings Has Furnished Followi Ng Evidences In Support Of Expenditure Job Charges Invoices Raised By Job Party Bank Statements Evidencing Payments To The Job Part Y By Account Payee Cheques Copies Of Tds Certificates In Respect Of Tds Deduct Ed U S 194 C From This Job Party Confirmation From This Job Party That They Have Don E Job Work Of Value Addition And Received Payment For It Ledger Account Copy Of This Job Party We Find That The Assessee Has Discharged His Onus B Y Adducing Sufficient Evidences And It Is Well Established Law That Asses See Is Required To Prove His Source Only He Cannot Be Expected To Prove The Sou Rce Of His Suppliers Or Depositors Of His Depositors Once The Assessee Pro Ves His Source Supply Of Service Addition Cannot Be Made In His Hand We A Lso Find That The Job Party Is Assessed To Tax And The Job Charges Received By Him From Assessee Are Included In Their Total Job Receipts The Job Party Has Confirmed To The A O That They Have Done Job Work For Assessee Sufficie Nt Evidences As Mentioned Above Were Furnished To A O Price Realization Of The Assessee Prove That The Value Addition Work Have Been Done On These Goods In This Way The Assessee Has Discharges His Onus And Proved That Job Work Ex Penses Are Bona Fide And Genuine In His Case In Such Situation There Remai Ns No Basis With A O To Disbelieve The Job Work Expenses In Hands Of Assess Ee Assessee Does Not Know Them How Then He Can Produce Them Or Furnish The Details In Respect Of Them They Are Not In Contact With Him And Merely B Ecause The Assessees Job Parties Could Not Furnish Details Of These Sub Job Parties In Their Assessment Proceedings He Cannot Be Penalized Or P Unished There Is No Fault On Part Of The Assessee 8 We Find That The Assessees Case Is Covered By D Ecision Of Honble Gujarat High Court In Case Of Cit Vs M K Brother S 163 Itr 249 Guj In The Assessment Order The A O Has Presumed That Th E Payments Made By The Appellant For Job Work Expenses Might Have Been Bac K Interest H Form Of Cross Cheques Etc This Is Just A Presumption Without Any Finding The A O Could Have Very Well Checked The Payments Made By Job Par Ties There Is No Finding At All That Any Portion Of These Payments Has Come Back To The Assessee Merely By Arbitrary Presumptions It Cannot Be Said That The Amounts Might Have Come Back To Assessee There Is No Such Findin G At All There Is No Basis At All For This Presumption The A O Must H Ave Checked The Payments Made By This Job Party And If At All There Was Any Finding Against Assessee Then He Could Have Clearly Brought Out The Same On Record But There Is No Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 8 Such Finding At All This Renders The Arbitrary Pre Sumption Of The A O To Be Completely Baseless And Unsustainable In The Absen Ce Of Any Such Finding The Genuine Expenditure Incurred By Assessee For Va Lue Addition Job Work Paid By A C Payee Cheques Cannot Be Disallowed This Iss Ue Is Clearly Covered By The Judgment Of Honble Gujarat High Court In Above Case Law 9 We Further Find That The Similar Issue Was Dealt With By The Tribunal In The Case Of Shalu Dyeing Printing Mills Pvt Ltd Vs Acit In Ita No 1491 And 1492 Ahd 2008 Dated 11 7 2008 Wherein Relying On The Case Of This Tribunal In The Case Of Akruti Dyeing Printing Mi Lls Pvt Ltd In Ita No 2551 And 2552 Ahd 2006 Order Dated 26 10 2007 Held The P Urchased As Genuine By Holding As Under 5 We Have Carefully Considered The Rival Submissio Ns And Perused The Material On Record Along With The Orders Of The Tax Authorities Below We Find That This Tribunal In The Case Of Akruti Dyeing P Rinting Mills Pvt Ltd In Ita No 2551 Ahd 2006 And Ita No 2752 Ahd 2006 Vide Orde R Dated 26 10 2007 While Dealing With Ground No 3 Relating To The Addi Tion On Account Of Bogus Purchases In Respect Of Colour And Chemicals Made O N The Basis Of Statement Of Shri Rohit Panwala Held As Under 20 Having Heard The Rival Submissions And Perused The Orders Of The Authorities And The Materials Available On Reco Rd We Find That A Search Operation Was Carried Out On Shri Rohit Panw Alla And His Associates And Other Proceedings Were Also Taken Ag Ainst Them Wherein Shri Rohit Panwalla Stated That He Used To Provide Accommodation Fake Bills At The Request Of The Part Ies On The Basis Of This The A O Has Treated The Purchases Made By The Assessee From 3 Parties Which Do Not Include Rohit Panwalla For Rs 7 21 950 As Bogus The Assessee Claimed That The Payments To Th E Parties Were Made By Account Payee Cheques And Against Receipt O F Goods We Find That The Revenue Has Brought No Material On Record To Show That The Purchases Shown By The Assessee Vvv Accommodation F Rom The Aforesaid 3 Parties Were Not Genuine And Where V Ac Commodation Fake Bills Shown By The Assessee No Statement Recorded From The Above 3 Parties By The Revenue Were Brought On Record We F Ind No Material On The Basis Of Which It Can Be Alleged That The Above Parties Admitted That The Bills Raised By Them Against The Assessee Were Merely Accommodation Bills In The Above Circumstances The Disallowance Made By The Revenue On The Basis Of Surmises And Co Njectures Without Any Positive Material On Record Therefore In Our Considered Opinion The Disallowance Made Is Unsustainable Ac Cordingly We Delete The Addition Made And Allow The Ground Of Ap Peal Of The Assessee Respectfully Following The Aforesaid Order Of The T Ribunal We Delete The Additions In Each Of The Assessment Years 10 In View Of The Above Facts And The Case Laws Di Scussed Above We Are Of The View That The Job Work Charges Incurred By T He Assessee Is A Legitimate Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 9 Business Expenditure And Allowable Accordingly We Reverse The Orders Of The Lower Authorities On This Issue And The Appeal Of T He Assessee Is Allowed 10 We Find That The Facts Being Exactly Identical As Discussed Above And Taking A Consistent View We Allow The Claim Of The Assessee And This Issue Of The Assessees Appeal Is Allowed 11 The Next Issue In This Appeal Of The Assessee I S Against The Order Of Cit A In Sustaining The Charging Of Interest U S 234 B Of The Act For This The Assessee Has Raised The Following Ground No 4 4 That The Honble C I T A Has Erred In Sustain Ing Charging Of Interest U S 234 B Of The Act In Respect Of Job Work Expenses Disallowed 12 As Both The Sides Agreed That This Charging Of Interest U S 234 B Of The Act Is Consequential Accordingly We Direct The Assessing Officer To Charge The Interest After Giving Appeal Effect To This Order Consequent Ly This Issue Of The Assessees Appeal Is Allowed Consequently Now Coming To Assessees Appeal In Ita No 1941 Ahd 2008 13 The First Issue In This Appeal Of The Assessee Is As Regards To Disallowance Of Deduction U S 80 Hhc Of The Act For This The Asse Ssee Has Raised The Following Ground No 1 2 1 That The Honble C I T A Has Erred In Upholdi Ng The Disallowance Rejection Of Deduction U S 80 Hhc Of Th E I T Act 1961 The Act By Wrongly Interpreting The Amendments Made By The Taxation Laws Amendment Act 2005 The Amendment Act 2 That The Honble C I T A Has Erred In Upholdin G The Nil Deduction U S 80 Hhc Of The Act By Mis Interpreting The Provi Sion Of The Amendment Act 14 We Find That We Have Already Set Aside This Iss Ue Exactly On Same Facts In Ita No 1938 Ahd 2008 Above In Para 4 Taking A Consistent View We Set Aside This Issue Also And Allowed For Statistical Purposes 15 The Next Issue In This Appeal Of The Assessee I S Against The Order Of Cit A In Sustaining The Addition Of Rs 2 13 84 300 Of Bus Iness Expenditure Of Job Work Charges For This The Assessee Has Raised The Foll Owing Ground No 3 Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 10 3 That On Facts And In The Circumstances Of Case The Honble C I T A Has Erred In Sustaining Addition Of Rs 2 13 84 300 Of Legitimate Business Expenditure Of Job Work Charges 16 We Have Heard The Rival Contentions And Gone Th Rough The Facts And Circumstances Of The Case The Brief Facts Leading To The Above Issue Are That The Assessee Is Engaged In The Business Of Manufacture And Export Of Fabrics During The Course Of Assessment Proceedings It Was Noticed By The A O That The Total Job Charges Claimed To Have Been Paid By The Assessee I S Rs 6 80 14 180 The A O Further Noticed That The Above Job Charges Also Inc Lude The Payments Made To The Following Parties 1 M S Vikram Job Works Rs 1 10 51 848 2 M S Shalini Screen Printing Works Rs 7 71 324 3 M S Pratika Hand Printin G Works Rs 95 61 128 Total Rs 2 13 84 30 0 It Was Found By The A O That The Parties Mentioned At Sl No 1 And 2 Were Assessed With The Same A O Whereas The Party Mentioned At Sl No 3 Was Assessed With Ito Ward 9 1 Surat The Cases Of All The Three Pa Rties Were Also Under Scrutiny Assessments For A Y 2004 05 During The Course Of Scrutiny Assessment Proceedings Of These Three Job Workers It Was Notic Ed That These Parties Failed To Prove The Fact That They Had Actually Done Any Job Work They Failed To Provide The Names And Addresses Of The Persons Who Have Done Ac Tual Job Work The Outgoing Fund Movement From The Bank Accounts Of These Parti Es Led Nowhere And These Job Work Parties Failed To Submit The Real Identities O F The Persons To Whom They Have Transferred The Funds On The Basis Of Above Facts The A O Reached To The Conclusion That The Job Charges Bills Issued By These Three Pa Rties Are Not In Respect Of Any Actual Job Work Done By Them But Are Accommodative Bills Provided By These Parties The A O Further Presumed That The Amounts Paid By The Assessee To These Job Parties Must Have Returned Back To The Assessee In Such A Manner That Little Evidence Can Be Found In This Respect The A O Acc Ordingly Disallowed The Job Charges Paid Of Rs 2 13 84 300 To Above Referred Three Parties 17 Before The Cit A It Was Contended That The Ass Essee Has Furnished All The Relevant Details And Evidences To The A O During As Sessment Proceedings The Evidences Furnished To A O During Assessment Proce Edings Include The Following Documentary Evidences Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 11 Job Charges Invoices Raised By Job Parties Bank Statements Evidencing Payments To The Job Par Ties By Account Payee Cheques Copies Of Tds Certificates In Respect Of Tds Deduc Ted U S 194 C From These Job Parties Confirmation From These Job Parties That They Have Done Job Work Of Value Addition And Received Payment For It Ledger Account Copy Of These Job Parties It Was Argued That The Assessee Is An Exporter Of V Alue Added Textile Fabrics Assessee Purchased Cloth From Market And Got Value Addition Work Done On Job Work Basis And Then Exported The Same Following Va Lue Addition Work Was Claimed To Have Got Done From These Job Work Parties Lace Work Chamki Work Bindi Work Gotan Work Glass Work Hira Moti Work Many More Fancy And Decorative Value Addition Work Generally Done On These Fabrics It Was Claimed That Above Job Work Are Very Common Feature In Textile Industry In Surat The Assessee Assigned These Works To The Job Parties Engaged In This Business These Job Parties Get The Work Done From A Number Of Sub Job Workers Who Are Individuals Small Groups Families Etc Th Is Is Home Industry Of The City These Sub Job Workers Are Small Individuals Group Of Individuals Families Etc Who Are Doing Work As Per Instructions Of Job Work Part Ies The Appellant Does Not Know These Sub Job Workers As They Are Scattered Over Th E City And Assessee Has No Contact With Them Assessees Contract Was With His Job Work Parties Contractors In Respect Of These Contractors Complete Documentary Evidences As Mentioned Above Were Furnished To The A O The Payments Were Made B Y A C Payee Only Cheques After Deducting Due Tds And There Is No Finding Tha T Any Portion Of These Payments Returned Back To The Assessee The A O Himself Has Mentioned That Outgoing Funds Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 12 From The Bank Accounts Of These Contracts Lead Nowh Ere And There Is No Evidence To The Effect That Any Portion Of The Payments Made To These Contractors Returned Back To The Assessee All The Three Parties Were Assesse D To Tax And Two Out Of Them Were Assessed With The Same A O Amounts Paid By The Ass Essee As Job Charges Were Included In Their Job Charges Income In Such A Sit Uation Assessee Has Discharges His Onus By Producing Sufficient Details Evidences And Identity Of His Contractors It Was Further Claimed That The Sub Job Workers Were N Ever In The Contact Of The Assessee As Lot Of Secrecies Were Maintained In Thi S Line It Was Further Contended That The Price Realization Itself Proves That The W Ork Was Done The Average Annual Export Sales Rate Is Rs 67 72 Per Mtr As Against Raw Material Cost Of Rs 51 37 Per Mtr If Depb Is Reduced From Raw Material Cost The Average Input Cost Works Out To Be Rs 42 60 Per Mtr As Against The Sales Realizat Ion Of Rs 67 72 Per Mtr It Was Argued That Such A High Realization Cannot Be Achie Ved Without The Value Addition Work Thus Sales Realization Itself Prove That The Value Was Got Done On The Fabrics In Such A Situation Merely Because These Contractor S Could Not Furnish Certain Details In Their Assessment Proceedings The Expenditure Ca Nnot Be Held To Be Non Genuine In The Hands Of The Assessee Assessee Had Proved H Is Source Job Work Parties And Cannot Be Asked To Prove The Source Of Source The Cit A However Did Not Agree With The Arguments Of The Assessee And Upheld The Disallowance It Was Accepted By The Cit A That In The Case Of Assessee The Identity Of All The Parties Were Established As They Were All Assessed To Tax However As In Their Cases They Failed To Prove That They Have Actually Done The Jo B Work The A O Was Correct In Disallowing The Job Charges In The Hand Of Assessee As Regards The Assessees Claim That The Payments Were Made To These Job Part Ies By A C Payee Only Cheques And There Was Not An Iota Of Finding By The A O That Any Portion Of These Pa Yments Returned Back To The Assessee It Was Concluded By The Cit A That There Was No Necessity To Reach That Level Of Evidence When Bas Ic Evidence Showed That The Expenditure Was Bogus By Mentioning These Reasons The Cit A Confirmed The Addition Aggrieved The Assessee Came In Second Ap Peal Before Us 18 Before Us The Learned Counsel For The Assessee Re Iterated The Same Arguments As Were Made Before Lower Authorities Th E Ld Counsel For The Assessee Also Argued That Identical Addition Made In The Cas E Of A Group Concern Of Assessee Has Been Deleted By Honble D Bench Of Itat Ahme Dabad In The Case Of Avinash Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 13 M Jhawar Ita No 1939 Ahd 2008 He Therefore Contended That Appeal Of The Assessee On This Issue Is Covered In His Favour By The Order Of The Tribunal In Above Case On The Other Hand Learned D R Placed Relian Ce On The Orders Of Lower Authorities And Re Iterated The Same Arguments As A Re Mentioned In The Assessment Order And Order Of The Cit A 19 After Hearing The Rival Contentions And Going T Hrough The Facts Of The Case We Find That Exactly On Similar Facts We Have Decided This Issue In Favour Of The Assessee And Against The Revenue In Ita No 1938 Ahd 2008 In Para 9 10 Above Taking A Consistent View We Allow This Issue Of The Assesse Es Appeal 20 The Next Issue Of Charging Of Interest U S 234 B Of The Act Has Also Been Allowed Consequently In Ita No 1938 Ahd 2008 In Para 12 Taking A Consistent View We Allow This Issue Of The Assessees Appeal Consequently Now Coming To Both The Appeals Of The Revenue In It A No 2015 And 2019 Ahd 2008 21 The Only Common Issue In These Appeals Of The R Evenue Is Against The Order Of Cit A Deleting The Addition Made By The Assess Ing Officer On Account Of Disallowance Of Foreigner Buyers Commission For This The Revenue Has Raised The Following Common Ground No 1 In Ita No 2015 Ahd 2008 1 On The Facts And Circumstances Of The Case In Law The Ld Cit A Has Erred In Deleting The Addition On Account Of Disall Owance Of Foreigh Buyers Agent Commission U S 37 R W S 93 For Rs 1 58 96 2 74 In Ita No 2019 Ahd 2008 1 On The Facts And Circumstances Of The Case In Law The Ld Cit A Has Erred In Deleting The Addition On Account Of Disall Owance Of Foreigh Buyers Agent Commission U S 37 R W S 93 For Rs 3 05 57 1 95 Similarly The Revenue Has Also Raised A Connected Ground Regarding Admission Of Additional Evidences Which Is Common In Both The C Ases And Which Read As Under 1 On The Facts And Circumstances Of The Case And In Law The Ld Cit A Ought To Have Rejected The Additional Evidences Pro Duced By The Assessee During The Course Of Appellate Proceedings 22 We Have Heard The Rival Contentions In Both The Cases And Gone Through The Facts And Circumstances Of The Case We Find That T He Facts Are Exactly Identical In Both The Cases Hence We Will Take The Facts In As Sessee Of Supreme India Overseas Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 14 Corporation And Applied In The Case Of M S Jhavar International The Only Ground In Departments Appeal Is Against The Deletion Of Addi Tion Of Rs 3 05 57 195 In Respect Of Foreign Buyers Agents Commission Deducted In T He Exports Sales Invoices During The Course Of Assessment Proceedings On Verificati On Of Export Sales Invoices And Bank Realization Certificates Brcs It Was Found By The A O That The Assessee Firm Has Paid Commission On Gross Invoice Value By Deduc Ting The Same In The Export Sale Invoices The Total Amount Of Commission So De Ducted In Export Sale Invoices Worked Out At Rs 3 05 57 195 Us 6 75 350 36 It Was Explained By The Assessee That As Matter Of Price Fixation The Pric Es Fixed Were Gross Selling Rates Less Commission Payable To Foreign Buyers Agents A Nd The Export Sales Invoices Were Raised Accordingly And The Assessee Was Entitl Ed To Receive Only Net Amounts After Deducting Commission It Was Further Contende D That It Is Evident From The Brcs That Only Net Amount Was Received By The Assessee A S Sale Proceeds It Was Therefore Argued By The Assessee That The Commissi On Deducted In The Sales Invoices Got Diverted At Source Itself And Was Neve R An Income Of The Assessee The Assessee Was Entitled To Receive Only Net Amount An D Such Net Amount Was The Sales Income Of The Assessee Accordingly The Asse Ssee Accounted Net Sales In His Accounts The Assessing Officer However Took A View That The Gross Sales Amount Mentioned In The Export Invoices Is The Sales Incom E Accruing To The Assessee And The Foreign Agents Commission Deducted In The Sale S Invoices Is An Application Of Such Income As Per A O The Gross Sales Amount Is The Sales Income Of The Assessee And Its Application Towards Foreign Agent S Commission Is An Expenditure Of The Assessee And Such Expenditure Can Be Allowed Only If The Assessee Proves That This Expenditure Is In Respect Of Services Pro Vided To Him By The Foreign Agents The A O Also Took A View That The Accounting Treat Ment Done By The Assessee By Accounting Only Net Sales Income Is Not Correct But The Assessee Must Have Reflected Gross Sales On Credit Side Of Trading A C And Must Have Debited Commission Deducted In The Sales Invoices As His Expenditure I N Profit Loss A C During The Assessment Proceedings The A O Asked The Assessee To Prove The Services Rendered By The Agents To The Assessee In Response To This The Assessee Filed The Confirmations From The Foreign Buyers Who Confirmed That They Have Procured Goods Through The Agents From The Assessee And That They Have Paid Commission To These Agents These Buyers Further Confirmed That The Com Mission So Paid To The Agents Was Deducted From Export Sales Invoices And Only Ne T Amount Was Remitted To The Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 15 Assessee It Was Also Confirmed By The Foreign Buye Rs That The Agents Rendered The Service Like Negotiating Prices Quality Designs Luster Etc And Goods Were Procured Through Them And The Assessee Was Entitled To Recei Ve Only Net Amount As Per Invoices In Their Confirmations These Foreign Buye Rs Also Mentioned The Names Of The Agents The A O Did Not Give Much Weightage To The Se Confirmation Letters Of Foreign Buyers By Terming Same To Be Vague Confirmation Let Ters The A O Asked The Assessee To Furnish The Confirmations From The Fore Ign Agents For Which Assessee Wanted Some Time And As The Case Was Getting Time B Arred The A O Passed The Assessment Order After Making Addition Of Above Ref Erred Commission Amount Of Rs 3 05 57 195 On The Ground That The Assessee Fa Iled To Proved The Services Of Foreign Agents The A O Also Invoked The Provision S Of S 93 Of The Act For Making This Addition Aggrieved The Assessee Preferred A Ppeal Before Cit A 23 Before The Cit A The Assessee Contended That The A O Was Not Correct In Treating The Gross Sales Amount As The Sales Income Of The Assessee And In Treating The Commission Deducted There From As Application O F Income It Was Contended That The Assessee Was Entitled To Receive Only Net Amoun T As Per The Export Sales Invoices And Such Net Amount Of Sales Invoices Only Accrued As Sales Income To The Assessee It Was Argued That Assessees Legal Right Was To Receive Only Net Amount As Mentioned In The Sales Invoices And Not The Gros S Amount This Fact Was Proved By Producing The Export Sales Invoices Brcs And Co Nfirmation Letters Of Foreign Buyers In Export Sales Invoices The Amount Chargea Ble Is Only Net Amount Gross Amounts And Foreign Agents Commission Were Mention Ed Only As A Matter Of Price Fixation The Price Fixed Was Gross Rate Less Comm Ission The Assessee Brought To The Notice Of The Cit A Certain Observations In T He Assessment Order In Which A O Himself Accepted That Commission Amount Deducted In Sales Invoices Was Neither Received Nor Is Going To Be Received By The Assesse E The Assessee Also Produced Bank Realization Certificates To Prove That Only Ne T Amount Was Received By The Assessee On The Basis Of Above Arguments It Was Ve Hemently Argued On The Basis Of Assessee That Only Net Amount Of Sales Invoices Is The Sales Income Of The Assessee The Commission Deducted In The Sales Invo Ices Was Never An Income Of The Assessee As Assessee Had No Legal Right To Rece Ive The Same The Assessee Also Placed Reliance On The Decision Of Honble Apex Cou Rt In The Case Of E D Sasson Co Ltd And Others Vs Cit 1954 26 Itr 27 Sc In Which It Was Laid Down That An Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 16 Income Can Be Said To Have Accrued Only If The Asse Ssee Gets A Legal Right To Receive It As An Alternate Argument It Was Contended That Even If The Said Commission Is To Be First Treated As His Income And Then Application Of The Same Towards Commission To Foreign Agents Then Also The Same Is Clearly A Deductible Expenditure It Was Claimed That In Such A Situation The Commission Has To Be Allowed Either As Commission Expenditure Or As Trading Expenditure B Eing Part Of Pricing Terms Before Cit A The Assessee Also Furnished The Conf Irmation Letters From The Foreign Agents Confirming The Following Facts That They Rendered Services In Transactions Of P Urchase Sale Between The Assessee And Foreign Buyers That They Received The Commission From Foreig N Buyers As A Matter Of Price Fixation The Commission W As Agreed To Be Deducted In The Sales Invoice And The Seller Assessee Wa S Entitled To Receive Only Net Amount As These Confirmation Letters From The Foreign Agen Ts Were Additional Evidences Cit A Remitted The Matter To The A O For His Remand Report In The Remand Report The A O First Objected To The Admission Of These Addit Ional Evidences And Then Mentioned That Though He Has Verified With Foreign Agents Directly By Writing Letters To Them And In Response These Foreign Agents Have Agai N Confirmed The Above Facts Still These Confirmation Letters Cannot Be Relied U Pon And Should Not Be Admitted In Evidence The Cit A After Elaborately Discussing All The Circumstances Admitted The Additional Evidences It Was Observed By The Ci T A That During Assessment Proceedings The Assessee Was Left With Little Time For Furnishing These Confirmation Letters And Was Therefore Prevented By Reasonable C Ause For Furnishing These Confirmation Letters At Assessment Stage In Respec T Of Invoking Of Provisions Of Section 93 It Was Argued On Behalf Of The Assessee That These Provisions Are Not At All Applicable To Case The Assessee And Are Mis App Lied To The A O It Was Contended That The Assessee Did Not Get Any Power To Enjoy Th E Income Of Non Resident I E Commission Income Of Foreign Agents And Therefore There Was No Case For Invoking Provisions Of Section 93 Of The Act The Cit A Aft Er Considering The Observation Of A O In The Assessment Order And The Remand Report And The Lengthy Submissions Made On Behalf Of The Assessee Deleted The Addition Aggrieved The Revenue Came In Second Appeal Before Us Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 17 24 Before Us At The Outset Learned Cit Dr Filed The Additional Ground Raising Objection Against The Admission Of Addition Evidenc Es By The Cit A It Was Argued That Despite Sufficient Opportunities Granted Durin G Assessment Proceedings The Assessee Did Not Furnish These Confirmation Letters To The A O And The Case Of The Assessee Is Not Falling Under Any Of The Clauses Of Rule 46 A Of The Income Tax Rules 1962 And Therefore Learned Cit A Has Erred In Admi Tting The Additional Evidences In The Form Of Confirmation Letters From The Foreign A Gents On The Other Hand Learned Counsel For The Assessee Argued That The Issue Of F Oreign Agents Commission Was Raised At The Fag End Of Assessment Proceedings And The A O Required The Confirmation Letters From Foreign Agents Just One O R Two Months Before The Date Of Assessment Order Since All These Agents Were Resid Ing Abroad And Because Of The Nature Of Their Business They Were On Tour Most Of The Times It Took Some Time In Obtaining Confirmation Letters From Them Therefore The Assessee Was Prevented By Reasonable Cause For Furnishing These Confirmation Letters During Assessment Proceedings And The Assessees Case Was Squarely Fa Ll Under Clause B Of Rule 46 A It Was Further Argued That The Confirmation Le Tters From Foreign Buyers Were Already Furnished During The Assessment Proceedings And The A O Had Erred In Over Looking Such Vital Evidences By Terming The Same To Be Vague Confirmation Letters Without Giving Any Reasons The Ld Counsel For The Assessee Therefore Argued That Cit A Had Rightly Admitted These Additional Eviden Ces In Alternate Plea He Also Argued That Even If These Additional Evidences Are Not Taken Into Consideration Then Also There Are Sufficient Evidences In The Form Of Export Sales Invoices Brcs And Foreign Buyers Confirmation Letters Which Prove Tha T The Assessee Was Entitled To Receive Only Net Amounts And That The Foreign Buyer S Procured The Goods Through The Agents To Whom Commission Was Paid By The Foreign B Uyers Which Was Deducted In Sales Invoices As A Matter Of Price Fixation 25 We Have Heard Both The Sides On This Issue And Seen From The Order Of Cit A That The Matter Was Decided After Taking Remand Pro Ceedings From The Assessing Officer The Ao Furnished His Remand Report Vide L Etter Dated 06 11 2007 We Find That The Cit A Has Elaborately Discussed This Issu E In Para 10 To 10 4 Of His Appellate Order As The He Has Decided The Issue Aft Er Taking Remand Report From The Assessing Officer We Are Of The Considered View T Hat There Is No Infirmity In Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 18 Admitting The Additional Evidences Accordingly T His Issue Of Revenues Appeals Is Decided Against 26 Coming To The Merits Of The Case The Learned C Ounsel For The Assessee Repeated The Same Argument As Were Made Before The Cit A He Carried Us Through The Paper Book File By Him Particularly The Copies Of Confirmation Letters From Foreign Buyers And Foreign Agents Placed On Page No 75 To 85 And Also Through The Sales Invoices And Brcs And Argued That The Assessee Firm Was Entitled To Receive Only Net Amount After Deducting The Commission He Argue D That It Was Evident From The Brcs That Only Net Amount Was Ultimately Received B Y The Assessee Company Firm He Also Mentioned That Even In The Calculating Dedu Ction U S 80 Hhc Of The Act The A O Himself Has Taken The Net Sales Amount As The Export Turnover Of The Assessee He Further Brought To Our Notice That The Identical Issue Of Foreign Agents Commission Deducted In Sales Invoices Has Already Been Decided By The Benches Of Itat Ahmedabad In Favour Of Assesses In Number Of Cases He Places Reliance On The Orders Of Itat Ahmedabad In Following Cases In Whi Ch Identical Additions Has Already Been Deleted By The Tribunal He Particular Ly Referred To The Case Law Of This Tribunal In The Case Of Shri Samir A Batra V Ito In Ita No 4130 Ahd 2007 Dated 12 12 2008 Wherein It Is Held As Under 25 We Have Heard The Rival Contentions And Gone Th Rough The Facts And Circumstances Of The Case First Of All It Is Seen From The Assessees Paper Book In The Case Of Guria Textiles At Paper Book Page 494 To 519 That Commission Was Payable To Them By The Buyer And Suc H Sums Were To Be Deducted From The Gross Invoice Aloes So That The Seller Was Entitled To Receive Only The Net Amount After Deducting The Com Mission In Response Of Each Transaction Therefore The Receipt Of The Co Mmission Amount Had Been Duly Confirmed By The Agents Which In Turn Meant T Hat The Amounts Which Were Deducted From The Invoice Values Actually Repr Esented Commission Payments Which Were Finally Received By The Agent This Fact Clearly Established The Genuineness Of The Transactions And What Is Important Is That This Was Done In Accordance With The Terms And Cond Itions Agreed Upon Between The Buyers And Seller Even Though There Wa S No Formal Agreement As Argued By The Ld Counsel For The Assessee We F Ind That The Agents Had Unequivocally Confirmed And Reconfirmed The Nature Of The Transactions And In The Absence Of Any Formal Agreement It Could No T Be Held As A Ground To Dismiss The Claim Of The Assessee There Were Clear Contra Confirmations From The Agents Which Simply Could Not Be Whisked Away By The Lower Authorities For The Disallowance Of Commission Expe Nditure Thus Once The Genuineness Of The Commission Payments As Well As I Ts Justification Of Having Been Wholly And Exclusively Incurred For The Purpos E Of Assessees Business Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 19 The Same Becomes Admissible As Deduction U S 37 1 Of The Act We Find That The Ao Has Relied Upon The Contents Of The Accounti Ng Standard I Which However Was Not Applicable To The Assessees Case Given The Nature Of The Transactions Entered Into By The Assessee The Ao Has Also Referred To Sec 5 Of The Act Which Defines Total Income It Is Obv Ious In The Circumstances And The Nature Of Transactions Which Have Been Discusse D Above In Details That What May Have Accrued To The Assessee Was The Gross Invoice Values Yet The Assessee Under The Terms Of The Agreement Or Un Derstanding With The Buyer Had To Deduct From The Invoices The Amount O F Commission Payable In The Background Of Such Fats It Could Not Be Held T Hat The Gross Invoice Amounts Were What Had Accrued To The Assessee And These Were The Amounts On Which The Assessee Should Have Been Asse Ssed The Outgoing Commission From The Invoice Values Would Have To B E Reduced From The Gross Amounts And The Net Amount Which Was The Actual Sum Received By The Assessee In India And Which Was Duly Certified A Nd Permitted By The Rbi And Its Authorized Dealer Was What Had Been Earned By The Assessee From Such Transactions We Find That The Ao Himself Had Note D In The Assessment Order That The Amounts Deducted As Commission From The Sa Le Invoices Were Neither Received By The Assessee During The Year Nor Was I T Ever Going To Be Received In Future If This Was The View Of The Ao Then He Contradicted Himself By Taxing Amounts Which Had Not Been Received At Al L Nor Did The Assessee Have Any Legal Right To Receive Such Amounts 26 We Find That The Commission Was Not Deducted From The Export Invoices In An Ad Hoc Manner And It Was Clearly Und Er An Agreement Between The Buyer And The Seller As Also Between The Buyer And The Agent Consequently The Assessee Was Under An Obligation To Deduct Commission From The Gross Invoice Values In The Present Case There Was A Compulsion To Deduct The Commission From The Export Invoices Whic H Was Clearly Indicated In The Confirmation Letters Of The Agents The Ingredi Ents Which Were Necessary For Such Deduction Of Commission To Be Treated As D Iversion Of Income By Overriding Title Was Clearly Present In The Case Of Cit V Madras Race Club 2002 255 Itr 98 The Hon Court Observed That In Order To Decide Whether There Has Been Diversion Of Income By Overriding Ti Tle The True Test Is Whether The Amount Sought To Be Deducted In Truth Never R Each The Assessee As His Income Whereby An Obligation Income Is Diverted B Efore It Reaches The Assessee It Is Deductible But Where The Income Is Required To Be Applied To Discharge An Obligation After Such Income Reaches T He Assessee The Same Consequence In Law Does Not Follow In The Present Case The Gross Export Proceeds Never Reached Its Hands No Such Income Ha D Therefore Accrued To The Assessee And This Was Because Of An Obligation Or Compulsion To Deduct The Commission From The Export Invoices Which Clear Ly Showed This To Be A Case Of Diversion Of Income By Overriding Title Th E Amounts Deducted From The Export Invoices Were Thus Clearly Allowable As Deduction The Lower Authorities Have Noted That Most Of The So Called C Onfirmations Are On Paper And Does Not Bear The Letter Head Of The Said Buyer S This Is Partly Correct Because Plain Paper Confirmation Was In Reference T O One Party Mohmed Abdula Of Dubai I E At Assessees Paper Book Page No 509 Which Is On Plain Paper However In Such Situation The Ao Ought To H Ave Make Inquiry If He Has Any Doubt In This Regard But He Simply Conclude D That It Is On A Plain Paper Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 20 And Did Not Believe The Aforesaid Commission Paymen T Particularly When The Assessee Is Having Supporting Evidence In Referen Ce To The Confirmation Like Sales Invoices Exchange Control Copy Of Shipping B Ills And Bank Realization Certificate All These Evidence Goes Without Sayin G That De Facto Commission Has Been Paid By Assessees Buyer To The Agents Dir Ectly The Other Confirmation Is From Al Ahed Jahid Textiles Of Kuva It Is Enclosed At Paper Book Page No 508 Which Is On Letter Head Then P T Sinar Of Indonesia Is Again On Letter Had At Paper Book Page No 511 To 515 Then Again Al Aheed Aljaheed Of Kuvait Is On Letter Head At Paper Book Page No 508 Then Again P T Sinar Is On Letter Head At Paper Book Page No 511 To 515 Jay Prakash Trading Of Dubai Is Again On Letter Head At Paper B Ook Page No 504 To 506 Then Lipinge Textile Of Dubai Is Again On Letter He Ad At Paper Book Page No 516 And 518 As Well As In The Case Of Saudi Extensi On Agency At Paper Book Page 507 So Except One Party Namely Mohmed Abdull A Of Dubai As Mentioned Above All Other Confirmations Were On Le Tter Head Of The Respective Parties 27 We Find From The Records As Well As The Argumen Ts Of Both The Sides That None Of The Payment Has Come Beyond Six Months But It Was Within Six Months As Can Be Verifiable From Bank Realization C Ertificate Enclosed At Paper Book Page No 390 To 451 The Assessee Has Received The Aforesaid Payment Within Six Months As Per Rbi Rules And Guidelines The Ao Has Presumed That Assessees Buyer Has To Pay Commission As And When Buyer Received The Payment From The Assessee Which Is Not Correct Because In Any Case The Assessee Have Received The Net Payment I E After Deducting Commission And Payment Of Commission Is Never Dependent On Payment To Be Received By The Assessee So It Has No Connection With The Realiz Ation Or Six Months Criteria In View Of The Above Facts Now We Will Discuss The Principle Laid Down By The Honble Gujarat High Court In The Case Of Ahmedabad Stamp Vendors Association Supra As Held By The Honble High Co Urt The Ingredients Of What Is Commission Are Contained In The Explanation To Sect 194 H There Has To Be Rendering Of Services Such Services Have To Be Rendered In The Course Of Buying And Selling Of Goods Or In Relatio N To Any Transaction Involving Any Asset Valuable Article Or Thing Th Ere Has To Be An Element Of Agency In The Rendering Of All Such Services Or Tra Nsactions And The Agent Should Have Been Authorized To Buy Or Sell On Behal F Of The Principal While The Transferee Or The Buyer Is Liable To The Transf Eror Or The Seller To Pay The Price For The Goods The Liability Of The Agent Is To Ensure The Delivery Of The Goods To The Buyer Not As His Own Property But As T He Property Of The Principal Or The Seller Transferor If Such Principles As E Nunciated By The Hon Courts Are To Be Applied In The Case Of The Assessee It W Ill Be Seen That All The Elements Which Are Requisite For Any Transaction In Volving Payment Of Commission Were Present Firstly Each Of The Tran Sactions Between The Assessee As The Seller And The Two Buyers Were Medi Ated By Agents Whole Existence Was Established Beyond Doubt By The Conf Irmation Letters Secondly There Was Rendering Of Services The Agen Ts Had Clearly Written That They Have Rendered Services In Procuring Samp Les Deciding The Orders And Settling All Matters Between The Buyers And Se Ller Including Payments By The Buyers To The Seller Considering The Nature O F Such Services Rendered By The Agents Even If They Were Appointed By The Buye Rs Services Were Ita No 1938 2015 Ahd 2008 1941 2019 Ahd 2008 A Y 2004 05 M S Jhawar International Supreme India Overseas Corpn V Ito Wd 2 1 Surat Page 21 Indirectly Rendered To The Assessee As The Seller S Well The Samples Were Produced By Them From The Assessee They Decided On The Quantum Of The Order And The Price They Settled All Disputes Betw Een The Buyers And The Seller And They Also Ensured The Payments To The S Eller The Existence Of The Agents And Their Functioning Was For The Benefit Of The Assessee As Well Therefore The Evidence Produced By The Assessee Ca Nnot Be Wished Away On The Ground That The Agents Only Provided Service S To The Buyer And Not To The Assessee In View Of The Above Facts And Circu Mstances We Are Of The View That The Commission Payment Is To Be Allowed T O The Assessee And Accordingly We Allow The Claim Of The Assessee An D The Orders Of The Lower Authorities Are Revered This Issue Of The Assesse Es Appeal Is Allowed 27 As The Facts Are Exactly Identical In The Prese Nt Case As Narrated Above To The Facts Of Case Of Shri Samir A Batra Supra Respectfully Following The Co Ordinate Bench Decision We Confirm The Order Of Cit A Dele Ting The Addition This Issue Of The Revenues Appeals Is Dismissed 28 In The Result Assessees Appeals Are Partly Allowe D As Indicated Above And That Of Revenues Appeals Are Dismissed Order Pronounced In Open Court On 08 01 2010 Sd Sd N S Saini Mahavir Singh Accountant Member Judicial Member Ahmedabad Dated 08 01 2010 Dkp Copy Of The Order Forwarded To 1 The Appellant 2 The Respondent 3 The Cit Appeals Ii Surat 4 The Cit Concerns 5 The Dr Itat Ahmedabad 6 Guard File By Order True Copy Deputy Asstt Registrar Itat Ahmedabad