M/s. K.V. Minerals,, Hyderabad v. Addl. CIT, Range-6,, Hyderabad

ITA 1996/HYD/2011 | 2008-2009
Pronouncement Date: 15-07-2013 | Result: Dismissed

Appeal Details

RSA Number 199622514 RSA 2011
Assessee PAN AAIFK5091P
Bench Hyderabad
Appeal Number ITA 1996/HYD/2011
Duration Of Justice 1 year(s) 7 month(s) 10 day(s)
Appellant M/s. K.V. Minerals,, Hyderabad
Respondent Addl. CIT, Range-6,, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2013
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 15-07-2013
Assessment Year 2008-2009
Appeal Filed On 05-12-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A' HYDERABAD BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY JUDICIAL MEMBER ITA NO. 1996/HYD/2011 ASSESSMENT YEAR 2008-09 M/S. K.V. MINERALS HYDERABAD PAN: AAIFK5091P VS. ADDL. CIT RANGE-6 HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI P. BALAKRISHNA RESPONDENT BY: SRI R. LAXMAN DATE OF HEARING: 15 .0 7 .2013 DATE OF PRONOUNCEMENT: 15.07.2013 O R D E R PER SAKTIJIT DEY JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-IV HYDERABAD DATED 27.09.2011 FOR A. Y. 2008-09. 2. THE ONLY ISSUE WHICH ARISES OUT OF THE GROUNDS RAIS ED BY THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF EXPE NDITURE CLAIMED TOWARDS PAYMENT OF COMMISSION TO AGENTS. 3. BRIEFLY THE FACTS ARE THE ASSESSEE A PARTNERSHIP F IRM IS ENGAGED IN THE BUSINESS OF TRADING IN MINERALS. FO R THE ASSESSMENT YEAR UNDER DISPUTE THE ASSESSEE FILED IT S RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 4 96 96 640. DURING THE SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFIC ER NOTICED THAT THE ASSESSEE HAD CLAIMED COMMISSION PAYMENTS T O THE FOLLOWING PARTIES: ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 2 PARTY NAME COMMISSION (RS.) SMT. B. BAGYALAKSHMI 59 52 000 M/S. R.K. MARKETING 29 76 000 S. LAVA KUMAR REDDY 7 44 000 M/S. VIJAY MINING PVT. LTD. 22 32 000 4. THE ASSESSING OFFICER THEREFORE CALLED UPON THE A SSESSEE TO JUSTIFY THE COMMISSION PAYMENT TO THE CONCERNED PARTIES BY FURNISHING THE FOLLOWING INFORMATION: 1. DETAILS OF THE SERVICES PROVIDED BY THE PARTIES TO WHOM COMMISSION PAYMENTS WERE MADE. 2. DETAILS OF CLIENTS ARRANGED BY THESE PARTIES. 3. COPIES OF AGREEMENTS ENTERED INTO WITH THESE PARTIE S. 4. COPIES OF CORRESPONDENCE MADE WITH THESE PARTIES. 5. BASIS OF COMMISSION PAYMENT. 5. EVEN AFTER AVAILING SEVERAL OPPORTUNITIES WHEN THE ASSESSEE EXPRESSED ITS INABILITY TO PRODUCE THE INF ORMATIONS CALLED FOR THE PARTNER OF THE ASSESSEE FIRM SRI VI PLAV KUMAR WAS SUMMONED U/S. 131 OF THE ACT AND A STATEMENT WAS RE CORDED FROM HIM ON 24.12.2010. FROM THE STATEMENT RECORDE D THE ASSESSING OFFICER DREW THE FOLLOWING INFERENCES: 1. THERE ARE NO WRITTEN AGREEMENTS WITH THE PARTIES TO WHOM COMMISSION WAS PAID. 2. THERE IS NO WRITTEN CORRESPONDENCE WITH THESE PARTI ES REGARDING THE CUSTOMERS INTRODUCED BY THEM AND SALE S EFFECTED. 3. THE ASSESSEE CONTROL IDENTIFY PARTY WISE LIST OF CUSTOMERS INTRODUCED BY THE SAID PARTIES. IT IS GI VING A VAGUE REPLY THAT ALL THE CUSTOMERS WERE COLLECTIVEL Y INTRODUCED. 4. THE ASSESSEE COULD NOT SPECIFY TONNAGE DETAILS OF S ALES EFFECTED THROUGH EACH OF THE COMMISSION AGENTS. 5. THE ASSESSEE CLAIMS THAT ALL ITS CUSTOMERS WERE INTRODUCED BY ALL THE AGENTS WHEREAS THE LIST OF CUSTOMERS FURNISHED BY SMT. BAGYALAKSHMI IS INCONSISTENT WITH THIS CLAIM. ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 3 6. IN A NUTSHELL THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF THE SERVICES RENDERED AND ALSO IT COULD FURNISH THE BASIS FOR PAYMENT OF COMMISSION. 6. THAT BESIDES THE ASSESSING OFFICER ALSO ISSUED SUMM ONS U/S. 131 OF THE ACT TO THE COMMISSION AGENTS NAMELY SMT. B. BAGYALAKSHMI SR. S. LAVA KUMAR REDDY SRI C. VIJAY SEKHAR REDDY DIRECTOR OF VIJAY MINING P. LTD. AND SRI RAV I KALYAN REDDY MANAGING PARTNER OF M/S. R.K. MARKETING SERV ICES AND RECORDED THEIR STATEMENTS. FROM THE STATEMENTS REC ORDED FROM THE COMMISSION AGENTS THE ASSESSING OFFICER NOTED T HAT EVEN THESE AGENTS COULD NOT PINPOINT THE SALES PROCURED BY THEM. THE ASSESSING OFFICER FURTHER INFERRED AS UNDER: 1. NONE OF THE COMMISSION AGENTS IS ABLE TO PROVIDE DEFINITIVE LIST OF CUSTOMERS QUANTITY OF SALES EFF ECTED AND WORKING OF COMMISSION. 2. IN FACT M/S. R.K. MARKETING SERVICES CLAIMS THAT IT DID NOT KNOW ANY CUSTOMERS (LEAVE ALONE INTRODUCING THEM). IT STATES THAT IT WAS ONLY ENSURING QUALITY OF ORE LOADED INTO TRUCKS. 3. THE AGENTS RECEIVED COMMISSION ONLY FROM THREE PARTIES NAMELY M/S. SUN INFRAA M/S. SUN MINERALS AND M/S. K.V. MINERALS AND NO ONE ELSE DESPITE THE FACT THAT BELLARY IS A BIG CENTRE FOR IRON ORE TRAD ING. 4. THESE AGENTS DID NOT PROVIDE SIMILAR SERVICES TO AN Y OTHER PARTIES DESPITE BOASTING THAT EXPERTISE IN IR ON ORE TRADING. 5. ALL THE AGENTS APPEAR TO BE DISPARATE AND THE ASSES SEE CLAIM THAT ALL ITS CUSTOMERS WERE INTRODUCED Y ALL THESE AGENTS DOES NOT APPEAR TO BE A RELIABLE STATEMENT. 6. MOST GLARING INCONSISTENCY APPEARS IN THE STATEMENT OF SMT. BAGYALAKSHMI WHO STATES THAT SHE INTRODUCED EVEN M/S. K.V. MINERALS. ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 4 7. IN VIEW OF THE INCONSISTENCIES NOTICED FROM THE STA TEMENTS RECORDED AND IN ABSENCE OF ANY DOCUMENTARY EVIDENCE FURNISHED BY THE ASSESSEE OR THE COMMISSION AGENTS IN SUPPORT OF SERVICES RENDERED THE ASSESSING OFFICER ASKED THE ASSESSEE T O SHOW CAUSE AS TO WHY THE PAYMENTS MADE TO THE AGENTS SHO ULD NOT BE TREATED AS NOT LAID OUT OR EXPENDED WHOLLY AND EXCL USIVELY FOR THE PURPOSE OF BUSINESS. IN HIS REPLY THE PARTNER SRI VIPLAV KUMAR SUBMITTED THAT IT IS NOT POSSIBLE TO GET CUST OMERS AND GOOD PRICE WITHOUT PAYING SALES COMMISSION. HE SUB MITTED THAT THERE IS NO SUCH TRADE PRACTICE IN THE REGION TO EN TER INTO AGREEMENTS WITH COMMISSION AGENTS. HE FURTHER SUBM ITTED THAT ALL THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CH EQUES AFTER TDS AND THE PAYEES HAVE ALSO CONFIRMED THE RE CEIPT. HE SUBMITTED THAT DUE TO COMPLEXITIES IN THE IRON TRAD E IT IS NOT POSSIBLE TO FURNISH EXACT DETAILS OF SALES PROCURED BY EACH AGENT. HE CLAIMED THAT ALL THE CORRESPONDENCE HAPPENED IN PERSON ONLY. 8. CONSIDERING THE AFORESAID FACTS IN THE LIGHT OF THE RATIOS LAID DOWN BY THE HONBLE DELHI HIGH COURT IN CASE O F SCHNEIDER ELECTRIC INDIA LTD. VS. CIT (304 ITR 360) AND BY TH E HONBLE SUPREME COURT IN CASE OF LACHMINARYAN MADANLAL VS. CIT (86 ITR 49) THE ASSESSING OFFICER NOTED THAT EVEN IF T HERE IS AN AGREEMENT BETWEEN THE ASSESSEE AND ITS SELLING AGEN TS FOR PAYMENT OF CERTAIN AMOUNTS AS COMMISSION ASSUMING THERE WAS SUCH PAYMENT THAT DOES NOT BIND THE ITO TO HOL D THAT THE PAYMENT WAS MADE EXCLUSIVELY AND WHOLLY FOR THE PUR POSES OF ASSESSEE'S BUSINESS. IT WAS NOTED BY THE ASSESSING OFFICER THAT IN ASSESSEE'S CASE EVEN THERE IS NO AGREEMENT WITH THE COMMISSION AGENTS AND THERE WAS NO DOCUMENTS ON THE BASIS OF WHICH IT CAN BE SAID THAT ANY COMMISSION WAS DUE AN D PAYABLE. HE NOTED THAT NOT ONLY THERE ARE NO AGREEMENTS; EV EN THERE ARE ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 5 NO EVIDENCES OF ANY CORRESPONDENCE OR PERSONAL MEET INGS BETWEEN THE ASSESSEE AND THE COMMISSION AGENTS SO AS TO SUGGEST THAT THERE WAS ANY RELATIONSHIP ON THE BASI S OF WHICH THE COMMISSION AGENTS PROCURED CUSTOMERS FOR THE AS SESSEE AND FOR WHICH THEY ARE ENTITLED FOR ANY COMMISSION. HE FURTHER NOTED THAT THE UNDERSTANDING BETWEEN THE PARTIES CLAIMED TO BE AN ORAL UNDERSTANDING WHETHER COULD HAVE BEEN A RRIVED AT WITHOUT ANY LONG LASTING RELATIONSHIP HAVING BEEN E STABLISHED BETWEEN THEM INVOLVING SUCH HUGE AMOUNTS OF MONEY O VER A PERIOD OF TIME. THE ASSESSING OFFICER THEREFORE CONCLUDED THAT MERE PAYMENT OF COMMISSION THROUGH ACCOUNT PAYEE CH EQUE AFTER TDS IN ABSENCE OF ANY OTHER SUPPORTING EVIDE NCE WILL NOT ABSOLVE THE ASSESSEE FROM DISCHARGING ITS BURDEN RE GARDING PROVING THE BUSINESS PURPOSE OF SUCH PAYMENT. THE ASSESSING OFFICER ACCORDINGLY DISALLOWED THE COMMISSION PAYME NTS AND ADDED IT TO THE RETURNED INCOME. THE ASSESSEE BEIN G AGGRIEVED OF THE DISALLOWANCE MADE IN THE ASSESSMENT ORDER PR EFERRED AN APPEAL BEFORE THE CIT(A). 9. IN COURSE OF HEARING BEFORE THE CIT(A) IT WAS CONTE NDED ON BEHALF OF ASSESSEE THAT COMMISSION HAD BEEN PAID TO THE AGENTS FOR SOLICITING CUSTOMERS FOR SALE OF THEIR PRODUCTS AND ADVISING THEM ON PRICING QUALITY AND SUPPLY OF THEIR PRODUC TS ON THE BASIS OF ORAL AGREEMENT BETWEEN THEM. IT WAS SUBMI TTED THAT COMMISSION WAS PAID THROUGH NORMAL BANKING CHANNELS AFTER TDS. IT WAS FURTHER CONTENDED THAT THE AGENTS HAD ACKNOWLEDGED HAVING RECEIVED THE COMMISSION IN THEI R STATEMENT BEFORE THE ASSESSING OFFICER. IT WAS CON TENDED THAT IT WAS NOT MANDATORY UNDER ANY RULE TO ENTER INTO AN A GREEMENT FOR PAYING COMMISSION AND IN CASE OF TRADE TRANSACT IONS MOSTLY THE PREVAILING PRACTICES ARE TAKEN INTO CONSIDERATI ON. IT WAS SUBMITTED THAT THE COMMISSION PAID BY THE ASSESSEE IS AS PER ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 6 THE TRADE PRACTICES IN THE LINE OF TRADING OF IRON ORE AND THROUGH THE COMMISSION AGENTS OR THROUGH THEIR NETWORK ONLY THE ASSESSEE COULD REACH THE CUSTOMERS AND COULD ACHIEV E TURNOVER. IT WAS CONTENDED THAT A.Y. 2008-09 BEING THE FIRST YEAR OF THE BUSINESS OPERATIONS OF THE ASSESSEE PAYMENT OF COM MISSION WAS THEREFORE ESSENTIAL TO ENTER INTO THE MARKET AND IMPROVE THE FIRM'S MARKET THERE. IN SUPPORT OF SUCH CONTEN TION THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE PA TNA HIGH COURT IN THE CASE OF CIT VS. BHARAT COLLIERIES LTD. (68 ITR 42). 10. IT WAS FURTHER SUBMITTED THAT COMMISSION PAYMENTS W ERE MADE TO THE AGENTS WHO ARE THIRD PARTIES AND NOT RE LATED TO THE PARTNERS OF THE FIRM SO AS TO WARRANT ACTION U/S. 4 0A(2) OF THE ACT. IT WAS SUBMITTED THAT THE STATEMENTS OF THE A GENTS DO NOT ESTABLISH THAT THE CONCERNS OR THE PERSONS ARE NOT GENUINE. IT WAS SUBMITTED THAT THERE BEING NO MATERIAL ON RECOR D AGAINST THE ASSESSEE THE AGENTS AND PAYMENTS MADE TO THEM HAVE TO BE TREATED AS GENUINE AS ALL THE AGENTS CONFIRMED HAVI NG RENDERED SERVICES TO THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE OBSERVATION MADE BY THE ASSESSING OFFICER THAT THE AGENTS ARE LOCATED AT HYDERABAD AND NOT AT THE WORK PLACE AT B ELLARY IS NEITHER RELEVANT NOR TENABLE. IT WAS SUBMITTED THA T ALL THE PERSONS DEALING IN IRON ORE GENERALLY HAVE THEIR MA IN OFFICE IN HYDERABAD FOR OPERATIONAL CONVENIENCE THOUGH THEY H AD OPERATIONS IN VARIOUS WORK PLACES. IT WAS CONTENDE D THAT WHEN THE ASSESSEE ITSELF HAS ITS REGISTERED OFFICE AT HY DERABAD AND CARRIED OUT THE OPERATIONS FROM ITS HEAD OFFICE IT IS NOT PROPER TO HOLD THAT IT COULD NOT HAVE BEEN POSSIBLE FOR THE A GENTS TO HAVE THEIR OFFICES AT HYDERABAD. THE ASSESSEE FURTHER C ONTENDED THAT IT HAD PAID TOTAL COMMISSION OF RS. 1 19 04 000 ON A TURNOVER OF RS. 19.34 CRORES WHICH WORKS OUT TO APPROXIMATELY 6 .16% AGAINST THE GENERAL RANGE OF COMMISSION IN SUCH LIN E OF ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 7 BUSINESS AT 10%. IT WAS SUBMITTED THAT THE ASSESSE E HAD ARRIVED AT A TAXABLE PROFIT OF RS. 4 96 96 643 AFTE R CONSIDERING ALL THE EXPENSES AND THE PROFIT SHOWN @ 25.69% WAS HIGHER IN THE LINE OF TRADING OF IRON ORE. IT WAS SUBMITTED THAT SINCE THE COMMISSION PAYMENT HAD ALREADY BEEN CONSIDERED AS I NCOME BY THE RECIPIENTS THE SAME COULD NOT HAVE BEEN DISALL OWED IN THE HANDS OF THE ASSESSEE AS IT WOULD AMOUNT TO LEVY OF TAX ON THE SAME INCOME TWICE. THE ASSESSEE ARGUED THAT FOR AL LOWANCE OF THE EXPENDITURE CLAIMED THE REASONABLENESS OF AN E XPENDITURE IS TO BE SEEN FROM THE POINT OF VIEW OF THE BUSINES SMAN AND NOT FROM THE VIEW POINT OF REVENUE AUTHORITIES. 11. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE WAS OF THE VIEW THAT THE ASSESSEE HAS NOT FURNISHED ANY DETAILS REGARDING SERVICES PROVIDED BY THE COMM ISSION AGENTS. ON THE OTHER HAND IT WAS CATEGORICALLY ADM ITTED THAT THERE WAS NO WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND THE COMMISSION AGENTS. NEITHER THERE IS ANY CORRESPOND ENCE AMONG THEM WHICH COULD HAVE SERVED AS A CONTEMPORANEOUS CIRCUMSTANTIAL EVIDENCE. EVEN THE BASIS OF COMMISS ION PAYMENT COULD NOT BE EXPLAINED BY SUBMITTING PARTY-WISE DET AILS OF SALES MADE THROUGH THE ALLEGED AGENTS AND THE RESULTANT W ORKING OF COMMISSION. THE CIT(A) WAS OF THE VIEW THAT THE CO NTENTION OF THE PARTNER OF THE ASSESSEE FIRM TO THE EFFECT THAT THE PARTIES BROUGHT IN BY EACH OF THE AGENTS WERE NOT IDENTIFIA BLE ON ACCOUNT OF THE FACT THAT ALL THE CUSTOMERS HAD BEEN INTRODUCED BY THE AGENTS COLLECTIVELY IS A LAME EXCUSE WHICH IS ILLOGICAL AND UNACCEPTABLE. THE CIT(A) WAS OF THE VIEW THAT IF T HE PLEA OF COLLECTIVE INTRODUCTION OF CUSTOMERS IS ACCEPTED T HEN IT CANNOT BE SAID THAT CERTAIN TONNAGE OF GOODS WERE SOLD BY THE ASSESSEE THROUGH ANY PARTICULAR AGENT WHICH WOULD RENDER THE VERY WORKING OF COMMISSION PAYABLE TO EACH OF THEM NOT W ORKABLE. ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 8 THE CIT(A) FURTHER HELD THAT THE FALSITY OF THE CLA IM IS FURTHER PROVED FROM THE STATEMENT OF SMT. BAGYALAKSHMI WHO FURNISHED A LIST OF CUSTOMERS WHEREIN EVEN THE NAME OF THE A SSESSEE FIRM WAS INCLUDED. 12. FROM THE ABOVE FACTS THE CIT(A) CAME TO A CONCLUSI ON THAT EVEN THE SO CALLED COMMISSION AGENTS THEMSELVE S COULD NOT PROVIDE ANY EVIDENCE OR DETAILS REGARDING THEIR SER VICES. THE COMMISSION AGENTS COULD NOT GIVE EVEN THE LIST OF C USTOMERS LEAVE ALONE THE QUANTITIES OF SALE EFFECTED THROUGH THEM IN TERMS OF TONNAGE SO AS TO DEMONSTRATE THAT THEY WERE ENTI TLED FOR COMMISSION FROM THE ASSESSEE FIRM. THE CIT(A) WAS OF THE VIEW THAT IT IS BEYOND HUMAN COMPREHENSION AND BUSINESS PRUDENCE THAT ANY PERSON RENDERING ANY SERVICE FOR CONSIDERA TION WOULD NOT KEEP EVEN THE MINIMUM RECORDS TO MAKE A CLAIM F OR PAYMENT TOWARDS SUCH SERVICES. BESIDES THE VERY N ATURE OF SERVICES CLAIMED TO HAVE BEEN RENDERED BY THEM WERE STATED TO BE DIFFERENT BY M/S. R.K. MARKETING SERVICES WHO AF TER CATEGORICALLY ADMITTING THAT THEY DID NOT KNOW ANY CUSTOMER AT ALL STATED THAT THEY HAD ONLY ENSURED THE QUALITY OF IRON ORE LOADED INTO TRUCKS WHICH WAS AGAIN NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. 13. THE CIT(A) ALSO TOOK NOTE OF THE FACT THAT IN THE I MPUGNED ASSESSMENT YEAR ALL THE SO CALLED AGENTS HAD RECEIV ED COMMISSION FROM ONLY THREE PARTIES VIZ. M/S. SUN I NFRAA M/S. SUN MINERALS AND M/S. K.V. MINERALS (THE PRESENT AS SESSEE). IT WAS FURTHER CONCLUDED BY THE CIT(A) THAT THE STATEM ENT RECORDED FROM THE AGENTS DOES NOT REVEAL ANY DETAILS OR EVID ENCE REGARDING THEIR NET WORK OR INFRASTRUCTURE OR SETUP FOR WORKING AS COMMISSION AGENTS. FROM THE ABOVE ANALYSIS OF T HE FACTS THE CIT(A) CAME TO A CONCLUSION THAT THE VERY CLAIM OF GENUINENESS ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 9 OF COMMISSION EXPENDITURE COULD NOT BE SUBSTANTIATE D BY THE ASSESSEE. IN ABSENCE OF ANY DOCUMENTARY EVIDENCE O R ANY OTHER EVIDENCE IN SUPPORT OF SUCH CLAIM THE CIT(A) CONFI RMED THE ADDITION MADE BY THE ASSESSING OFFICER. 14. THE LEARNED AR HAS REITERATED THE SAME CONTENTIONS AS MADE BEFORE THE CIT(A). HE SUBMITTED A WRITTEN SUB MISSIONS CONTENDING THAT THE COMMISSION PAID BY THE ASSESSEE IS ALLOWABLE TRADE PRACTICE IN THE LINE OF TRADING OF THE IRON ORE AND THE COMMISSION PAYMENTS ARE INCURRED WHOLLY AND EXC LUSIVELY FOR THE PURPOSE OF THE TRADE AND IT IS AN ALLOWABLE EXPENDITURE U/S. 37(1) OF THE INCOME TAX ACT. IT IS A PART OF F IRMS WORKING EXPENSES AND INCURRED AS A PART OF THE PROCESS OF P ROFIT EARNING. THROUGH THE COMMISSION AGENTS OR THROUGH THEIR NET WORKING ONLY THE ASSESSEE COULD REACH THE CUSTOMERS AND CAN ABLE TO ACHIEVE THE TURNOVER. THE ASSESSMENT YEAR 2008-09 I S THE FIRST YEAR OF BUSINESS OPERATIONS OF THE ASSESSEE AND THE PAYMENT OF COMMISSIONS IS ESSENTIAL TO ENTER INTO THE MARKET A ND TO IMPROVE ITS MARKET SHARE AND IN A NEW AREA. THOUGH THE COMMISSIONS AT HIGH RATES PAID ON ORDERS OBTAINED T HROUGH AN AGENT AT THE START OF THE BUSINESS IS ALLOWABLE EXP ENDITURE. THE AR SUBMITTED THAT IN THE CASE OF BHARAT COLLIERIES LTD. (SUPRA) THE HON'BLE HIGH COURT OBSERVED AS FOLLOWS: 'BUSINESS EXPENDITURE - CAPITAL OR REVENUE EXPENDITURE - HIGH RATE OF COMMISSION PAID ON ORDER S PROCURED THROUGH AGENT FOR THE FIRST TIME-NO ENDURI NG BENEFIT INVOLVED AS ASSESSEE OBTAINED NO MONOPOLY RIGHTS NOR ABNORMAL CONCESSIONS-PLACEMENT OF CUSTOMER OUTSIDE THE COUNTRY DOES NOT DETERMINE NATURE OF EXPENSES -HIGH RATE OF COMMISSION WAS NORMAL PRACTICE IN THE COMMERCIAL WORLD AND WAS CONCEDED WITH A VIEW TO IMPROVING CLIENTELE-AMOUNT AND EXTENT OF EXPENDITURE HAS NO BEARING ON CHARACTER OF EXPENDITURE-EXPENDITURE AN INTEGRAL PA RT OF PROFIT EARNING PROCESS-FINDING BY TRIBUNAL THAT ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 10 HIGH RATE OF COMMISSION WAS A NORMAL COMMERCIAL TRANSACTION-HENCE ALLOWABLE EXPENDITURE UNDER S. 10(2)(XV)' 15. THE AR SUBMITTED THAT THE COMMISSION PAYMENTS MADE TO THE AGENTS ARE THIRD PARTIES AND NOT RELATED TO THE PARTNERS OF THE FIRM WARRANTING THE ATTRACTION OF PROVISIONS U/ S. 40A(2). ALL THE COMMISSION RECIPIENTS ARE THIRD PARTIES. ASSESS ING OFFICER RELIED ON SCHNEIDER ELECTRIC INDIA LTD V. CIT (304 ITR 360) (DEL) AND LACHMINARAYAN MADAN LAL V. CIT (1972) 86 ITR 43 9 (SC) ARE NOT RELATED IN THE PRESENT CASE OF THE ASSESSEE . EVEN THE RECIPIENTS HAVE CONFIRMED THE RECEIPT OF THE COMMIS SIONS WHICH FACT WAS ALREADY INDICATED IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS ALREADY VERIFIED THE EXPENDIT URE AND GOT THE CONFIRMATIONS FROM THE PARTIES WHO HAVE RECEIV ED COMMISSION THROUGH THEIR SWORN IN STATEMENTS RECOR DED BEFORE THE ASSESSING OFFICER. THE RECIPIENTS OF THE COMMIS SIONS HAVE ADMITTED THE RECEIPT OF THE COMMISSION TO THE ASSES SING OFFICER AND THERE IS NO DENIAL FROM NOT EVEN A SINGLE PARTY WHICH IS EVIDENT FROM THE ASSESSMENT ORDER ITSELF. THE AR PLACED RELIANCE PLACED ON SUPREME RAYONS (P) LTD. V. DY.CI T (2006)104 TTJ 896 WHERE IN IT IS OBSERVED AS UNDER: 'BUSINESS EXPENDITURE -COMMISSION -GENUINENESS - ASSESSEE CLAIMED DEDUCTION OF EXPENDITURE IN RELATION TO PAYMENT OF COMMISSION AND FILED CONFIRMATION WITH REGARD TO PAYMENT FROM RECIPIENT HOWEVER THE SAME WAS NOT ACCEPTED BY AO AND ADDITION REPRESENTING COMMISSION AMOUNT WAS MADE. HELD: NOT JUSTIFIED. LETTER OF CONFIRMATION F ILED BY ASSESSEE WAS SELF EXPLANATORY. RECIPIENT HAD CATEGORICALLY STATED THAT IT HAD RECEIVED PAYMENT O F COMMISSION. HOWEVER PAYMENT OF COMMISSION ALSO STOOD PROVED FROM ACCOUNTS OF THE ASSESSEE VIS-A-VI S THE RECIPIENT. THEREFORE ADDITION DELETED AND EXPENDITURE IN RELATION TO PAYMENT OF COMMISSION ALLOWED.' ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 11 16. THE AR SUBMITTED THAT THE EXCERPTS OF THE STATEMENT S RECORDED BY THE ASSESSING OFFICER BY WAY OF CROSS E XAMINATION WHICH ARE INDICATED IN THE ASSESSMENT ORDER DO NOT ESTABLISH THAT THESE CONCERNS OR PERSONS ARE NOT GENUINE AND THE ASSESSING OFFICER HAS NOT EXPRESSED ANY DOUBT ABOUT THE GENUINENESS OF THE PERSONS WHO HAVE RECEIVED COMMIS SION. ALL THE COMMISSION AGENTS HAVE CONFIRMED THROUGH THEIR SWORN STATEMENTS THAT THEY HAVE DONE SERVICE TO. THE ASSE SSEE WHICH PROVES THE GENUINETY OF THE TRANSACTIONS WHICH IS E VIDENT FROM THE ASSESSMENT ORDER. THE ABOVE COMMISSIONS PAYMEN TS WERE PAID THROUGH ACCOUNT PAYEE CHEQUES AND THE NECESSAR Y TAXES WERE DEDUCTED AND REMITTED TO THE INCOME TAX DEPART MENT AND WERE ALSO SUBMITTED TO THE ASSESSING OFFICER. THE A SSESSING OFFICER HAS ALSO VERIFIED THE PAYMENT OF THE ABOVE COMMISSIONS THROUGH ACCOUNT PAYEE CHEQUES ON PERUSAL OF THE BAN K ACCOUNTS AND HAS NOT EXPRESSED ANY DOUBT THE GENUIN ENESS OF THE TRANSACTIONS. HE PLACED RELIANCE ON ITO VS NORT HERN TRADERS (2004) 1 SOT 446 (ASR) WHEREIN IT IS OBSERVED AS UN DER INCOME FROM UNDISCLOSED SOURCES-UNEXPLAINED EXPENDITURE - COMMISSION ON SALE OF DYES CHEMICALS AND PAINTS-SI MILAR COMMISSION PAID TO SAME PERSONS HAVING BEEN ALLOWED IN EARLIER AS WELL AS IN SUBSEQUENT YEARS SAME COULD NOT BE D ISALLOWED IN THE PRESENT ASSESSMENT YEAR MORE SO WHEN PAYMENT S WERE MADE ACCOUNT PAYEE CHEQUES AND THERE WAS NO MATERIA L TO DOUBT GENUINENESS OF PAYMENT. 17. THE AR SUBMITTED THAT THE OBSERVATION OF THE ASSESS ING OFFICER THAT THE AGENTS ARE LOCATED AT HYDERABAD AN D NOT AT WORK PLACE I.E. BELLARY IS NOT RELEVANT AND TENABLE. GEN ERALLY ALL THE PERSONS DEALS IN IRON ORE WILL HAVE THEIR MAIN OFFI CES IN HYDERABAD FOR OPERATIONAL CONVENIENCE THOUGH THEY H AVE OPERATIONS IN VARIOUS WORK PLACES. EVEN THE ASSESSE E HAS THE ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 12 REGISTERED OFFICES AT HYDERABAD ONLY. WHEN THE ASSE SSEE HAS DONE THE OPERATIONS HAVING HEAD OFFICE AT HYDERABAD WHY NOT IT BE POSSIBLE FOR THE AGENTS TO HAVE OFFICE AT HYDERA BAD AND THERE IS NO RULE THAT THE AGENT SHALL HAVE OFFICES AT WOR K PLACE ONLY. SIMILARLY FOR QUALITY CONTROL THE ASSESSEE HAS TO DEPENDENT ON ONE OF THE AGENTS SINCE HE IS NEW TO HIS BUSINESS A ND ALSO NEW TO THE AREA. IT IS THE FIRST YEAR OF OPERATIONS OF THE ASSESSEE. ACCORDINGLY THE ASSESSEE HAS UTILIZED THE SERVICES OF THE EXPERIENCED STAFF OF THE ONE OF THE COMMISSION AGEN T TO ENSURE THE QUALITY AND PAID THE COMMISSION FOR THEIR SERVI CES. 18. THE AR SUBMITTED THAT THE COMMISSION PAID RS. 1 19 04 000 AGAINST THE TOTAL TURNOVER OF RS. 19 34 00 000 WHICH IS 6.15% OF THE TURNOVER. GENERALLY THE COMMI SSIONS ON THIS LINE OF ACTIVITY IS ABOUT 10% WHERE AS THE ASS ESSEE HAS INCURRED AT THE RATE OF 6.15% WHICH IS NOT ABNORMAL AND IT IS WITHIN THE ALLOWABLE LIMITS. THE ASSESSEE HAS ARRIV ED A TAXABLE NET PROFIT (AFTER CONSIDERING ALL EXPENSES INCLUDIN G COMMISSION) OF RS. 4 96 96 643 AGAINST THE TURNOVER OF RS. 19 3 4 00 000 WHICH IS ABOUT 25.69% WHICH IS A HIGHER PROFIT ADMI TTED IN THIS LINE OF TRADING OF IRON ORE AND HAS PAID ADVANCE TA X OF RS. 1 70 00 000 AND SELF ASSESSMENT TAX OF RS. 2 78 198 . 19. THE AR SUBMITTED THAT THE COMMISSION PAYMENTS WERE ALREADY CONSIDERED AS INCOME BY THE RECIPIENTS IN T HEIR RETURN OF INCOME -AND THE SAME WERE NOT REJECTED BY THEIR ASS ESSING OFFICER. THE RECIPIENTS HAVE FURNISHED SUCH AS THEI R RETURN OF INCOME FILED BANK ACCOUNTS AND OTHER RELEVANT INFOR MATION AS CALLED BY THE AO DURING THE CROSS EXAMINATION WHICH IS REPRODUCED BY THE AO IN THE ASSESSMENT ORDER AND TH E AO AS NOT BROUGHT ANY MATERIAL AGAINST TO THEIR SUBMISSIO NS. ONCE IT IS CONSIDERED AS INCOME IN OTHER HANDS WHO HAVE REC EIVED IT ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 13 CANNOT BE DISALLOWED IN THE HANDS OF PERSON WHO HAS PAID IT. IF IT IS DISALLOWED IT IS NOTHING BUT LEVYING OF TAX T WICE I.E. TAXING THE INCOME TWICE WHICH IS AGAINST LAW. 20. THE AR SUBMITTED THAT THE ASSESSING OFFICER HAS VER IFIED ALL THE SALES PURCHASES EXPENSES BANK ACCOUNTS AN D BOOKS OF ACCOUNTS AND ACCEPTED THE SAME AND ALSO OBTAINED CONFORMATIONS THROUGH SWORN IN STATEMENTS FROM THE RECIPIENTS FOR THE COMMISSION PAYMENTS. THE ASSESSING OFFICER HAS NOT FOUND ANY MATERIAL OR INFORMATION AGAINST THE COMMI SSIONS PAYMENTS. THE ASSESSEE HAS FOLLOWED THE LOCAL CUSTO MS AND THE PREVAILING SYSTEMS IN THE TRADE AND ACCORDINGLY PAI D THE COMMISSION PAYMENTS AND ALL PAYMENTS WERE THROUGH B ANKING TRANSACTIONS AND NECESSARY TAX DEDUCTIONS WERE MADE WHICH CLEARLY INDICATES THAT THE ASSESSEE HAS FOLLOWED TH E PROCEDURES AND SYSTEMS. THE ASSESSING OFFICER HAS VERIFIED THE ABOVE TRANSACTIONS AND DID NOT NOTICE ANY FLAW THAT ATTRA CTS DISALLOWANCE OF THE EXPENDITURE. THERE IS NO MANDAT ORY LAW AND PROCEDURE TO HAVE AGREEMENTS FOR THE COMMISSION PAY MENTS IN ANY BUSINESS TRADE. IN SUPPORT OF SUCH CONTENTION THE LEARNED AR ALSO RELIED UPON THE DECISION OF ITAT BANGALORE BENCH IN THE CASE OF S.K. ENGINEERING VS. JCIT (104 TTJ (BANG) 7 64). 21. THE LEARNED DR ON THE OTHER HAND WHILE STRONGLY SUPPORTING THE ORDERS OF THE REVENUE AUTHORITIES SU BMITTED THAT THE ASSESSEE HAVING FAILED TO FURNISH A SINGLE EVID ENCE TO SUBSTANTIATE THE CLAIM OF COMMISSION PAYMENT FURTHE R HAVING FAILED TO PROVE THAT THE EXPENDITURE TOWARDS COMMIS SION PAYMENT WAS WHOLLY LAID OUT FOR THE PURPOSE OF BUSI NESS THE DISALLOWANCE OF SUCH PAYMENT IS PERFECTLY JUSTIFIED . THE LEARNED DR FURTHER SUBMITTED THAT THE ISSUE IN DISPUTE IS S QUARELY COVERED BY THE DECISION OF THE ITAT HYDERABAD BENCH IN CASE OF ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 14 M/S. SUN INFRAA AND M/S. SUN MINERALS IN ITA NO. 2117/HYD/2011 AND ITA NO. 2116/HYD/2011 DATED 18.5. 2012 WHEREIN THE TRIBUNAL WHILE CONSIDERING THE DISALLOW ANCE OF COMMISSION PAYMENT UNDER IDENTICAL FACTS AND CIRCUM STANCES HAD UPHELD THE DISALLOWANCE. 22. WE HAVE CONSIDERED SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO APPLI ED OUR MIND TO THE DECISIONS RELIED UPON BY THE PARTIES. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE WOR TH ITS NAME EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE C IT(A) TO SUBSTANTIATE ITS CLAIM THAT COMMISSION PAYMENT WAS ACTUALLY MADE TO THE SO CALLED AGENTS TOWARDS SERVICES RENDE RED BY THEM FOR IMPROVING BUSINESS OF THE ASSESSEE AND FURTHERM ORE THE EXPENDITURE INCURRED WAS WHOLLY AND EXCLUSIVELY FO R THE PURPOSE OF BUSINESS. IT IS A FACT ON RECORD WHICH IS ALSO ADMITTED BY THE ASSESSEE THAT NEITHER THERE IS ANY WRITTEN AGREEMENT WITH THE COMMISSION AGENTS NOR THERE IS A NY CORRESPONDENCE IN THIS REGARD WITH THEM. FURTHERMO RE A PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES CLEA RLY REVEALS VARIOUS INCONSISTENCIES IN THE STATEMENT RECORDED F ROM THE SO CALLED COMMISSION AGENTS AS WELL AS PARTNER OF THE ASSESSEE FIRM. NO EVIDENCE HAS BEEN FURNISHED EVEN BEFORE U S BY THE ASSESSEE TO CONTROVERT SUCH FINDING OF FACT RECORDE D BY THE LOWER AUTHORITIES. IT IS ALSO A FACT THAT FOR THE ASSESS MENT YEAR UNDER DISPUTE THE SO CALLED COMMISSION AGENTS HAVE RECEI VED COMMISSION FROM ONLY THREE PARTIES INCLUDING THE AS SESSEE ALONG WITH M/S. SUN INFRAA AND M/S. SUN MINERALS. THE CO MMISSION AGENTS HAD NOT RECEIVED COMMISSION FROM ANY OTHER P ARTIES DURING THE YEAR. ONLY BECAUSE THE PAYMENT WAS MADE THROUGH CHEQUE AND TAX WAS DEDUCTED AT SOURCE IT WOULD NOT MAKE THE SO CALLED COMMISSION PAYMENTS GENUINE IN ABSENCE OF ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 15 CORROBORATIVE EVIDENCE. SIMILARLY DISCLOSURE OF SU CH PAYMENTS AS INCOME BY THE AGENTS WOULD ALSO NOT MAKE THE COM MISSION PAYMENTS GENUINE IN ABSENCE OF SUPPORTING EVIDENCE. THE CO- ORDINATE BENCH OF THE TRIBUNAL WHILE CONSIDERING ID ENTICAL FACTS AND CIRCUMSTANCES IN RESPECT OF COMMISSION PAYMENT MADE IN THE CASE OF M/S. SUN INFRAA AND M/S. SUN MINERALS ( SUPRA) TO THE VERY SAME COMMISSION AGENTS UPHELD THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A ) BY HOLDING AS FOLLOWS: '6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS SETTLED LAW THAT IF THE ASSESSEE CLAIMED DEDUCTION OF ANY EXPENDITURE THE BURDEN OF PROOF IS ON THE ASSESSEE TO ESTABLISH THA T SUCH EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEE'S BUSINESS. IN THE PRESENT CASE IT IS AN ADMITTED FACT THAT THE RE IS NO WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND THE RECIPIENTS OF THE 5 COMMISSION AGENTS. EVEN IF THE RE IS NO WRITTEN AGREEMENT THE ASSESSEE COULD CLAIM DEDUCTION FOR THE EXPENSES PROVIDED IF IT IS ESTABLISHED WITH DOCUMENTARY AND COGENT EVIDENCE THAT SUCH EXPENDITURE WAS INCURRED FOR THE PURPOSE OF ITS BUSINESS. NOW IN THE ASSESSEE'S CASE THERE IS EVEN AN IOTA OF EVIDENCE REGARDING RENDER OF ANY SERVICES TO THE ASSESSEE TO PROCURE BUSINESS TO THE ASSESSEE. THE ASSESSEE COULD NOT EVEN PRODUCE ANY CORRESPONDENCE BETWEEN THE PARTIES WHICH COULD HAVE SERVED AS A CONTEMPORANEOUS CIRCUMSTANTIAL EVIDENCE. THE ASSESSEE IS NOT ABLE TO CORRELATE TH E COMMISSION PAYMENTS WITH REFERENCE TO THE SALE. THOUGH THE ASSESSEE MADE A CLAIM THAT THE COMMISSION AGENTS COLLECTIVELY INTRODUCED THE PARTI ES THERE IS NO CORRESPONDENCE BETWEEN THE COMMISSION AGENTS. AS SEEN FROM PARAS 6.2 AND 6.3 OF THE CIT(A)'S ORDER THE STATEMENTS GIVEN BY THE ASSESSE E ARE CONTRADICTORY IN NATURE. THE PARTIES HEREIN HA VE NOT GIVEN ANY EVIDENCE ABOUT THE NAMES OF PERSONS WHO WERE RECOMMENDED BY THEM. 7. BEING SO IT CANNOT BE PRESUMED THAT THE PARTIES WHOM THE ASSESSEE MADE ANY SALES WERE THROUGH THESE PARTIES TO WHOM THE COMMISSION HAS BEEN PAID. AS THERE IS NO EVIDENCE WHATSOEVER TO SUPPOR T ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 16 THE CLAIM OF THE ASSESSEE THAT THESE IMPUGNED RECIPIENTS OF THE PAYMENTS RENDERED ANY SERVICE FOR WHICH COMMISSION HAS BEEN PAID WHEN THEY DID NOT EVEN KNOW THEM. THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAS DISCHARGED THE ONUS TO PROVE THAT THE COMMISSION WAS PAID WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEE'S BUSINESS. THE ASSESSEE RELIED ON VARIOUS JUDGEMENTS WHICH CANNOT BE APPLIED TO THE ASSESSEE'S CASE AS THESE JUDGEMENTS ARE ON THEIR OWN FACTS. THE QUESTION WHETHER THE ASSESSEE HAS ESTABLISHED THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS IS ESSENTIALLY A QUESTION OF FACT TO BE DECIDED ON MERIT OF EACH CASE. 8. FROM THE STATEMENTS OF THE SO CALLED COMMISSION AGENTS FURTHER INFERENCES CAN BE DRAWN THAT NONE OF THE COMMISSION AGENTS IS ABLE TO PROVIDE DEFINITIVE LIST OF CUSTOMERS QUANTITY OF SALES EFFECTED AND WORKING OF COMMISSION. IN FACT M/S. R K MARKETING SERVICES CLAIMS THAT IT DID NOT KNOW ANY CUSTOMERS (LEAVE ALONE INTRODUCING THEM). IT STATES THAT IT W AS ONLY ENSURING QUALITY OF ORE LOADED INTO TRUCKS. TH E AGENTS RECEIVED COMMISSION ONLY FROM THREE PARTIES NAMELY M/S. SUN LNFRAA. M/S. SUN MINERALS AND M/S. K V MINERALS AND NO ONE ELSE DESPITE THE FACT THAT BELLARY IS A BIG CENTRE FOR IRON ORE TRADING. THESE AGENTS DID NOT PROVIDE SIMILAR SERVICES TO ANY OTHE R PARTIES DESPITE BOASTING THEIR EXPERTISE IN IRON OR E TRADING. ALL THE AGENTS APPEAR TO BE DISPARATE AND THE ASSESSEE CLAIM THAT ALL ITS CUSTOMERS WERE INTRODUCED BY ALL THESE AGENTS DOES NOT APPEAR TO BE A RELIABLE STATEMENT. THE MOST GLARING INCONSISTEN CY APPEARS IN THE STATEMENT OF SMT. B. BAGYA LAKSHMI WHO STATES THAT SHE INTRODUCED EVEN M/S. K V MINERALS. 9. THERE WAS NO AGREEMENT BETWEEN THE ASSESSEE AND THE COMMISSION AGENTS AND THERE WAS NO DOCUMENT ON THE BASIS OF WHICH IT COULD BE SAID THA T THE COMMISSION WAS DUE AND PAYABLE. AS IT HAS BEEN ALREADY POINTED OUT EVEN THE AGREEMENTS DO NOT BIND THE ASSESSING OFFICER FROM ENQUIRING INTO DEDUCTIBILITY OF COMMISSION. IN THIS CASE THERE ARE NO AGREEMENTS AND ALSO THERE WAS NO EVIDENCE OF ANY CORRESPONDENCE OR ANY PERSONAL MEETINGS BETWEEN THE ASSESSEE AND THE COMMISSION AGENTS TO SUGGEST ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 17 THAT THERE WAS ANY RELATIONSHIP ON THE BASIS OF WHI CH THE COMMISSION AGENTS PROCURED CUSTOMERS FOR THE ASSESSEE FOR WHICH THEY WERE ENTITLED TO RECEIVE COMMISSION. THE UNDERSTANDING BETWEEN THE PARTIES WAS AN ORAL UNDERSTANDING AND IT WAS DOUBTFUL THAT SUCH AN ORAL UNDERSTANDING COULD HAVE BEEN ARRIVED AT WITHOUT ANY LONGSTANDING RELATIONSHIP HAVING BEEN ESTABLISHED BETWEEN THE ASSESSEE AND THE COMMISSION AGENTS INVOLVING SUCH HUGE AMOUNTS OF MONEY OVER A PERIOD OF TIME. FURTHER THE ASSESSEE IS UNABLE TO FURNISH THE DETAILS OF CUSTOMERS INTRODUC ED BY EACH AGENT AND ALSO THE EXACT WORKING OF COMMISSION PAYMENT MADE TO EACH OF THE AGENTS. MERE PAYMENT OF COMMISSION THROUGH ACCOUNT PAYEE CHEQUE AFTER DEDUCTION OF TDS DOES NOT ABSOLVE THE ASSESSEE FROM DISCHARGING ITS BURDEN WITH REGARD TO PROVING BUSINESS PURPOSE OF THE PAYMENTS. 10. IN THE ABSENCE OF ANY CREDIBLE EVIDENCE FOR MAKING SUCH PAYMENTS WE ARE INCLINED TO DISALLOW THE SAME. 11. RELIANCE IS PLACED ON THE DECISION OF THE TRIBU NAL IN THE CASE OF DAVINDER SINGH V. ACIT (104 ITD 325) (ASR) CIT VS. CALCUTTA AGENCY LTD. (19 ITR 191) (SC) LAKSHMIRATAN COTTON MILLS CO. LTD. VS. CIT (7 3 ITR 634) (SC) AND L.H. SUGAR FACTORY & OIL MILLS (P ) LTD. VS. CIT (19 CTR) (SC) 185 : (1980) 125 ITR 293 (SC). 12. RELIANCE IS ALSO PLACED ON THE DECISION OF DELH I BENCH OF THE ITAT IN THE CASE OF ROGER ENTERPRISES (P) LTD. VS. DCIT (88 ITD 95) HELD AS UNDER; '51. EXAMINING THIS MATTER FROM ANOTHER ANGLE WE FEEL THAT THE ONUS OF PROOF THAT THE COMMISSION PAI D WAS GENUINE WAS ON THE ASSESSEE. THE QUESTION THAT FURTHER ARISES IS AS TO WHETHER THE ASSESSEE HAS DISCHARGED THE ONUS AND IF YES THEN HOW. ACCORDING TO THE ASSESSEE HE HAS DISCHARGED THE ONUS BY PROVING THAT THE PAYMENT HAS BEEN MADE BY CHEQUE. NOT ONLY THIS THE NAME OF THE PERSON TO WHOM THE PAYMENT BY CHEQUE IS MADE IS DISCLOSED AND THEREFORE THE PAYMENT IS GENUINE. 52. THIS ARGUMENT SO RAISED BY THE ASSESSEE SOUNDED WELL AT THE THRESHOLD BUT WHEN WE EXAMINED IT FURTHER WE FOUND THAT IT CANNOT HOLD ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 18 WATER. MERELY BECAUSE PAYMENT IS MADE BY CHEQUE MAY IN SOME CASES PERSUADE THE AUTHORITIES TO HOLD THE PAYMENT TO BE GENUINE BUT IN THIS CASE THE SITUATION IS TOTALLY REVERSE AS THE PERSON/PARTY TO WHOM THE PAYMENT BY CHEQUE IS ALLEGED TO HAVE BEEN MADE HAS HIS OWN STORY TO TELL AND WHICH STORY IS BELIEVED BY US. THERE IS A COMPLETE BLACK OUT ON THE NATURE OF SERVICES RENDERED. THERE IS NO MATERI AL PLACED ON RECORD NOR HAS OUR ATTENTION BEEN DRAWN TO ANY MATERIAL WHICH WOULD DEMONSTRATE WITHOUT DOUBT THE NATURE OF SERVICES RENDERED BY THESE THRE E COMPANIES. KEEPING IN MIND THESE FACTS WE FEEL THAT THE ASSESSEE HAS MISERABLY FAILED TO DEMONSTRATE THE SERVICES RENDERED AND HAS THUS FAILED TO DISCHARGE THE ONUS. 53. AS THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS HE IS NOT ENTITLED TO THE CLAIM OF COMMISSION PAID.' 23. FACTS IN THE PRESENT CASE BEING MATERIALLY THE SAME AND THE ASSESSEE HAVING NOT BROUGHT ANY OTHER EVIDENCE OR MATERIAL FOR ENABLING US TO TAKE A DIFFERENT VIEW DEVIATING FROM THE AFORESAID VIEW OF THE CO-ORDINATE BENCH OF THE TRIB UNAL WE ARE INCLINED TO FOLLOW THE SAME AND HOLD THAT THE DISAL LOWANCE OF COMMISSION PAYMENT MADE TO THE AGENTS IS PERFECTLY IN ORDER AND THEREBY DOES NOT REQUIRE ANY INTERFERENCE FROM US. ACCORDINGLY THE ORDER PASSED BY THE CIT(A) IS UPHE LD. THE GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 24. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JULY 2013. SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD DATED 15 TH JULY 2013 TPRAO ITA NO. 1996/HYD/2011 M/S. K.V. MINERALS =================== 19 COPY FORWARDED TO: 1. M/S. K.V. MINERALS 8 - 2 - 248/B PLOT NO. 1 ROAD NO. 3 JOURNALIST COLONY BANJARA HILLS HYDERABAD-500 034 . 2. THE ADDL. CIT RANGE - 6 6 TH FLOOR A BLOCK AC GUARDS HYDERABAD. 3. THE CIT(A) - IV HYDERABAD. 4. THE CIT - III HYDERABAD 5 . THE DR ' A ' BENCH ITAT HYDERABAD