ACIT,, Patiala v. Sh. Raj Kumar Wadhwa,, Patiala

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI N. BARATHVAJA SANKAR VICE PRESIDENT AND MS SUSHMA CHOWLA JUDICIAL MEMBER ITA NO.697/CHD/2009 ASSESSMENT YEAR: 2006-07 THE ACIT VS. SHRI RAJ KUMAR WADHWA CIRCLE PATIALA. PROP. LUCKY TRADERS PATIALA PAN NO. AABPW6062H (APPELLANT) (RESPONDENT) & ITA NO.741/CHD/2009 ASSESSMENT YEAR: 2006-07 SHRI RAJ KUMAR WADHWA VS. THE ACIT PROP. LUCKY TRADERS CIRCLE PATIALA PATIALA PAN NO. AABPW6062H APPELLANT BY : SMT JAISHREE SHARMA RESPONDENT BY: SHRI PANKAJ JAIN / SHRI D.K.GOYAL ORDER PER SUSHMA CHOWLA JM BOTH THE APPEALS OF THE REVENUE AND ASSESSEE ARE A GAINST THE ORDER OF CIT(A) PATIALA DATED 30.4.2009 RELATING TO AS SESSMENT YEAR 2006-07 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE ACT. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 41 14 518/- CLAIMED AS LIAISONING COMMISSION IGNORING THE FACT THAT BOTH THE ASSESSEE AS ALSO SO CALLED SUB-AGENTS HAD FAILED TO PROVE THAT THE SUB AGENTS HAD RENDERED ANY SERVICE TO THE ASSESSEE. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS FURTHER ERRED IN DELETING THE ABOVE ADDI TION WITHOUT APPRECIATING THE FACT THAT ALLEGED APPOINTM ENT OF SUB AGENTS BY THE ASSESSEE WAS IN VIOLATION OF T HE AGREEMENT THAT EXISTED BETWEEN THE ASSESSEE AND HIS PRINCIPAL I.E. M/S SARVASHAKTIMAN TRADERS PVT LTD. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE ABOVE DISALLOWANCE IS ALSO COVERED BY HON'BLE JURISDICTIO NAL HIGH COURTS DECISION IN THE CASE OF M/S EMSON TOOL S MANUFACTURE CORPN. LTD V CIT REPORTED IN (2006) 296 ITR 304(P&H). 3. THE ASSESSEE IN ITS APPEAL HAS RAISED THE FOLLOW ING GROUND OF APPEAL:- ON THE FACTS AND CIRCUMSTANCE THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 3 02 690/- WRONGLY AND ILLEGALLY MADE BY THE ASSESSING OFFICER UNDER SECTION 69C OF THE INCOME TAX ACT 1961 ALLEGEDLY FOR UNEXPLAINED HOUSEHOLD EXPENSES. 4. BOTH THE APPEALS RELATING TO THE SAME ASSESSEE W ERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORD ER FOR THE SAKE OF CONVENIENCE. 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WA S A CEMENT STOCKIEST AND WAS ACTING AS HANDLING CUM SALES PROMOTER OF M/ S J.K. CEMENT WORKS. THE ASSESSEE WAS ALSO PROVIDING LIAISON SERVICES AG AINST WHICH THE ASSESSEE WAS RECEIVING LIAISON COMMISSION FROM M/S SARV SHAKTIMAN TRADERS PVT LTD. NEW DELHI FOR SOLICITING THE PRO DUCTS OF THE COMPANY TO THE GOVERNMENT AND SEMI-GOVERNMENT ORGANIZATIONS AN D INSTITUTIONAL 3 BUYERS. THE ASSESSEE DURING THE YEAR UNDER CONSIDE RATION HAD RECEIVED COMMISSION OF RS. 55.86 LACS AGAINST WHICH THE ASSE SSEE CLAIMED TO HAVE PAID COMMISSION TO THE SUB AGENTS ON ACCOUNT OF LIA SIONING AMOUNTING TO RS. 41.14 LACS. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF THE PAYMENTS AND THE IDENTITY OF THE PERSONS TO WHOM THE PAYMENTS ON ACCOUNT OF LAISOINN G EXPENSES WERE MADE. THE PARTY WISE LIST OF COMMISSION PAID IS INCORPORATED AT PAGES 4 & 5 OF THE ASSESSMENT ORDER. THE PLEA OF THE ASSE SSEE WAS THAT THE SAID PAYMENTS WERE MADE AFTER DEDUCTION OF SERVICE TAX A ND TDS. THE ASSESSING OFFICER REQUISITIONED THE ASSESSEE TO PRO DUCE THE SAID PERSONS. EVEN SUMMONS WERE ISSUED U/S 131 OF THE INCOME TAX ACT 1961 BUT NONE OF THE SAID PERSONS / CONCERN COMPLIED WITH THE NOT ICES U/S 131 OF THE ACT. IN RESPECT OF TWO CONCERNS I.E. M/S RAJASTHANI ENGI NEERING WORKS AND M/S S.K. WOOLTEX THE LETTERS WERE RETURNED BACK. THE ASSESSING OFFICER ALSO ISSUED PENALTY NOTICE TO ALL THE PARTIES FOR NON CO MPLIANCE OF THE NOTICES U/S 131 OF THE INCOME TAX ACT 1961. MEANWHILE SHR I RAJEESH GARG PARTNER OF M/S PUNJAB ENGINEERING WORKS AND SOLE PR OPRIETOR OF M/S RAJNEESH KUMAR WHO HAD RECEIVED COMMISSION OF RS. 1 4.28 LACS AND RS. 2.50 LACS RESPECTIVELY APPEARED BEFORE THE ASSESSI NG OFFICER ON 1.12.2008 AND HIS STATEMENT WAS RECORDED. THE COPY OF THE SA ID STATEMENT IS ENCLOSED AS ANNEXURE 1 TO THE ASSESSMENT ORDER. T HE ASSESSING OFFICER ANALYZED THE STATEMENT OF SHRI RAJNEESH GARG AND OB SERVED AS UNDER:- A) SHRI RAJNEESH GARG OR HIS CONCERN HAD NEVER ACT ED PREVIOUSLY AS LIAISON AGENT FOR CEMENT. B) THE FIRM M/S PUNJAB ENGINEERING WORKS WAS ENGAGE D IN THE BUSINESS OF MANUFACTURE OF IRON AND STEEL AND S ALE AND PURCHASE OF IRON SCRAP. 4 C) SHRI RAJNEESH GARG HAD ENTERED INTO AN AGREEMEN T WITH THE ASSESSEE THAT HIS FIRM WOULD BE RESPONSIBLE FOR COLLECTION OF PAYMENTS AS WELL AS SETTLING OF DISPU TES. D) WHEN QUESTIONED IN REPLY SHRI RAJNEESH GARG STATED THAT HE HAD NO EVIDENCE OF HOW MUCH COLLECTION HE H AD MADE AS HE WAS NOT DOING ANY COLLECTION WORK DIRECT LY AS THE PURCHASING AGENCY DIRECTLY SENT THE DRAFTS T O M/S J.K. CEMENTS. HE WAS UNABLE TO TELL THE NAME OF ANY AGENCY OR DEPARTMENT IN WHICH HE WAS INSTRUMENTAL T O EFFECT ANY SUCH COLLECTION. E) THE ASSESSING OFFICER ASKED AS TO HOW MANY DISP UTES REGARDING SUPPLY OF PAYMENT AROSE AND WERE SETTLED BY HIM. IN REPLY IT WAS SUBMITTED BY HIM THAT NEITHE R ANY DISPUTE AROSE NOR WAS SETTLED. FURTHER HE HAD NO EVIDENCE OF COLLECTION OF PAYMENTS MADE ON BEHALF O F THE ASSESSEE. WITH REGARD TO THE RAISING AND SETTLEMEN T OF BILLS AND RECEIVING PAYMENT IN MARCH 2006 IT WAS EXPLAINED BY SHRI RAJNEEH GARG THAT THE SAME WAS SETTLED AT THE END OF THE YEAR. F) THE BILLS RAISED BY M/S PUNJAB ENGINEERING WORKS REVEALED THAT ALL THE BILLS WERE RAISED IN THE MONT H OF MARCH 2006 THOUGH THE SERVICES WERE CLAIMED TO HAV E BEEN RENDERED THROUGH OUT THE YEAR. FURTHER THE SAID BILLS PERTAINED TO THE SUPPLIES MADE TO VARIOUS GOVERNMENT AUTHORITIES BUT DETAILS REGARDING NAME ADDRESS PLACE AND QUANTITY OF CEMENT SUPPLIED HAVE NOT BEEN MENTIONED. THE BILL SIMPLY MENTIONS THE GRO SS QUANTITY OF THE CEMENT SUPPLIED TO VARIOUS GOVERNME NT AUTHORITIES. G) THE SAID PARTY AS PER ASSESSING OFFICER FAILED T O PRODUCE ANY EVIDENCE OF HAVING DONE ANY WORK FOR M/S LUCKY TRADERS SOLE PROPRIETARY CONCERN OF THE ASSESSEE APART FROM THE COPIES OF BILLS RAISED. 5 6. THE ASSESSING OFFICER NOTED THAT THE BILLS OF CO MMISSION CHARGED BY M/S SHAM LAL RAJNEESH KUMAR OF WHICH SHRI RAJNEESH GARG WAS THE PROPRIETOR DO NOT CONTAIN ANY DETAILS ABOUT THE C OMMODITY QUANTITY RATE OF COMMISSION CHARGED AND PLACE WHERE THE SUPPLIES WERE MADE. THE GROSS AMOUNT OF COMMISSION CHARGED AMOUNTING TO RS. 2 50 000/- IS MENTIONED ON THE SAID BILL RAISED BY M/S SHAM LAL R AJNEESH KUMAR. 7. THE STATEMENT OF SHRI JOHN JACOB PARTNER OF M/S RAJASTHANI ENGINEERING WORKS WAS RECORDED ON 22.12.2008 WHEREI N HE STATED THAT HE NEVER MADE ANY TRANSACTION IN PERSON WITH M/S LUCKY TRADERS AND THERE WAS NO WRITTEN CONTRACT WITH M/S LUCKY TRADERS. TH E SAID PARTY WHEN ENQUIRED OF ANY EVIDENCE OF HAVING RENDERED SERVICE S TO THE ASSESSEE DENIED TO HAVE ANY SUCH EVIDENCE. BILL OF COMMISSI ON OF RS. 76 46 947/- WAS RAISED AND QUANTIFIED AT THE END OF THE YEAR A ND THE BILL WAS NOT RAISED ON ACCRUAL BASIS. THE BILLS SUFFERED FROM THE SAME INFIRMITY AS IN THE CASE OF THE FIRM OF WHICH SHRI RAJNEESH GARG WA S THE PARTNER. THE ASSESSING OFFICER FOUND THAT THOUGH THE SAID CONCER N WAS RENDERING SERVICES TO THE ASSESSEE THROUGHOUT THE YEAR THE B ILL OF COMMISSION OF RS. 7 46 947/- WAS RAISED BY THE SAID PARTY ONLY ON 31. 3.2006 DESPITE THE FIRM MAINTAINING ITS ACCOUNT ON MERCANTILE BASIS. 8. THE ASSESSING OFFICER ALSO RECORDED THE STATEME NT OF SHRI S.K. CHHABRA PROP. M/S S.K. WOOLTEX U/S 131 OF THE ACT TO WHOM COMMISSION OF RS. 9 67 217/- WAS PAID. THE INFIRMITY FOUND I N THE STATEMENTS ARE ENLISTED BY THE ASSESSING OFFICER AT PAGES 14 TO 16 OF THE ASSESSMENT ORDER AND THE SAID PARTY FAILED TO FURNISH ANY EVIDENCE T O SUBSTANTIATE THAT IT HAD IN ESSENCE RENDERED ANY SERVICES TO THE ASSESSEE EX CEPT FOR FURNISHING ONE 6 BILL RAISED ON 11.2.2006. THERE WAS NO WRITTEN AGR EEMENT BETWEEN THE PARTIES THOUGH THE ASSESSEE CLAIMED TO HAVE ENTERE D INTO AN AGREEMENT WITH M/S S.K.WOOLTEX BUT WAS UNABLE TO PRODUCE TH E SAME. THE SAID PERSON COULD NOT EXPLAIN THE EXACT NATURE OF SERVIC ES OF THE CONCERN FOR WHICH LIAISONING COMMISSION WAS PAID. 9. THE ASSESSING OFFICER FURTHER NOTED THE ASSESSEE TO HAVE RECEIVED COMMISSION ON ACCOUNT OF LIAISONING AT THE RATE OF RS. 25/- PMT FROM M/S SARAVSHAKTIMAN TRADERS PVT LTD (M/S S.S.T.P.L) THE CHIEF STOCKIEST OF J.K. CEMENT AGAINST WHICH THE ASSESSEE HAD CLAIMED TO HAVE PAID COMMISSION AT THE RATE OF RS. 20 PMT TO M/S PUNJAB ENGINEERING WORKS AND OTHERS DESPITE THE FACT THAT AS PER CLAUSE 9 OF THE AGREEMENT PLACED AT ANNEXURE II WITH THE ASSESSMENT ORDER THE WORK OF LIASONING WOULD NOT BE ASSIGNED OR CHARGED OR MORTGAGED BY THE ASSESSEE IN FAVOUR OF ANY OTHER PARTY. THE CONCLUSION OF THE LD. ASSESSING OFFICER WAS THAT THE ASSESSEE HAD ALLEGED TO HAVE PAID THE COMMISSION TO THE CONC ERNS WHO HAD EITHER CLOSED DOWN THEIR REGULAR BUSINESS OR THEIR INCOME WAS NOMINAL. THE ASSESSING OFFICER OBSERVED THAT 80% OF THE COMMISSI ON RECEIVED HAD BEEN PAID BY THE ASSESSEE FOR THE SERVICES THE NATURE O F WHICH WAS NOT KNOWN. THE COMMISSION WAS HELD TO BE HAVE BEEN PAID TO EVA DE CORRECT TAX LIABILITY. THE GENUINENESS OF THE TRANSACTIONS O F PAYMENT OF COMMISSION BY THE ASSESSEE BEING MADE WHOLLY AND EXCLUSIVELY F OR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE NOT BEING ESTABLISHED TH E ASSESSING OFFICER DISALLOWED THE SAME. RELIANCE WAS PLACED ON EMSO N TOOLS MANUFACTURE CORPORATION LTD VS. CIT [296 ITR 304(P&H) 10. THE CIT(A) HELD AS UNDER:- 7 4. I HAVE GONE THROUGH THE RIVAL SUBMISSIONS AND DOCUMENTS PLACED ON RECORD. I AM OF THE FIRM VIEW THAT THERE IS NO DOUBT ABOUT THE EXISTENCE OF ASSESSEES AGREEMENT WITH HIS PRINCIPALS M/S SARAVSHAKTIMAN TRADERS PRIVATE LIMITED TO PROVIDE LIAISON SERVICES TO THE PRINCIPALS. IN CONNECTION WITH SUPPLY TO GOVT. SEMI-GOVT. AND INSTITUTIONAL BUYERS AND THE APPELLANT HAS HIS WON ESTABLISHMENT WITH OTHER RELATED INFRASTRUCTURE AT PATIALA BHATINDA & RAJPURA STATION ONLY AND HE HAS NO PERMANENT ESTABLISHMENT FOR THE LIAISON SERVICES UNDERTAKEN IN THE STATE OF HARYANA. THE ASSESSING OFFICER HAS FAILED TO POINT OUT ANY THING ADVERSE TO FIND OUT AND DEFECT IN AGREEMENT OR SERVICES TO BE PROVIDED AS PER AGREEMENT AND HE HIMSELF ADMITTED THE EXISTENCE OF AGREEMENT WITH PRINCIPALS WITH APPELLANT & APPELLANT WITH HIS SUB-AGENTS AND SAID SUB-AGENTS IN THE STATEMENT RECORDED BEFORE AO HAS ADMITTED THE RECEIPT OF PAYMENTS FROM APPELLANT FOR SERVICES RENDERED ON HIS BEHALF AND QUANTIFICATION OF SERVICES AS WELL A S TYPE OF SERVICES PROVIDED BY THEM TO THE APPELLANT AND IT IS ALSO PERTINENT TO MENTION THAT ALL THE PAYMENT HAS MADE TO LIAISON AGENTS BY APPELLANT BY ACCOUNT PAYEE CHEQUES AND TAX DEDUCTIONS AT SOURCE HAS BEEN DEDUCTED PROPERLY ALSO ON ALL THE COMMISSION PAYMENTS PROPER SERVICE TAX HAS LEVIED AND PAID AS PER EVIDENCE SUBMITTED BY THE APPELLANT IN SUPPORT OF HIS CONTENTION. 5. THE APPELLANT HAS PROVIDED PROPER DETAILS TO AO REGARDING PAYMENT OF AMOUNT TO HIS AGENTS WITH SERVICES PROVIDE DURING THE ASSESSMENT PROCEEDINGS AND AO NEVER CONVERTED BY THE AO. AND AO FINDING REGARDING SHORT COMINGS IS JUST PROCEDURAL IN NATURE AND NOT OF SUBSTANCE WHICH LEAD TO DISALLOWANCE OF EXPENDITURE INCURRED. FURTHER AO'S FINDING THAT THE APPELLANT HAS PASSED HIGH VOLUME OF COMMISSION TO HIS SUB AGENTS IS WITHOUT ANY BASIS AND TOTALLY UNWARRANTED AS THE ACTION OF A BUSINESSMAN TO SPEND ANY EXPENDITURE IN GUIDED BY VARIOUS FACTORS SUCH AS BUSINESS EXIGENCY LACK OF IN HOUSE SUPPORT FUTURE GROWTH AND BUSINESS DEVELOPMENT OVERALL PROFIT AFTER MEETING ALL THE EXPENDITURE ETC. HENCE BUSINESSMAN HAS TO DONE HIS BUSINESS INDEPENDENTLY AND WITHOUT ANY ADVICE FROM OTHER PERSON NOT CONNECTED WITH HIS BUSINESS. HENCE AO IS NO PERSON TO ADVICE THE APPELLANT TO SUGGEST THE WAYS TO MAKE EXPENSES AND TO CONDUCT HIS BUSINESS. 6. THE A.O. HAS OBSERVED THAT APPOINTMENT OF SUBAGENTS/SERVICE PROVIDERS HAS MADE IN VIOLATION OF APPELLANT AGREEMENT WITH HIS PRINCIPAL IS NOT CORRECT AS THERE IS NO CLAUSE IN THE AGREEMENT 8 PLACED ON RECORD WHICH FORBIDS THE ENGAGEMENT OF ANY OTHER PERSONS BY APPELLANT FURTHER THE AGREEMENT WITH PRINCIPALS PROVIDE FOR TERMINATION OF AGREEMENT IN CASE OF VIOLATION BY EITHER PARTY AND SUCH AGREEMENT REMAIN IN FACT ALSO SUPPORT THE VIEW POINT OF THE APPELLANT THAT THE SUBAGENT APPOINTMENT IS NOT VIOLATION TO THE AGREEMENT WITH PRINCIPLES AND THE AO HAS FAILED TO SUBMIT ANYTHING CONTRARY TO THIS OR IN SUPPORT OF HIS CONTENTION. IT IS ALSO WORTH MENTIONING THAT THE APPELLANT CLAIM IN IMMEDIATE PRECEDING YEARS ON THE SAME GROUNDS HAS NEVER BEEN CHALLENGED AND ACCEPTED AS IT IS IN THE ASSESSMENT MADE UNDER SECTION 143(3). THE AO HAS NOTHING TO STATE THAT QUESTION THE GENUINENESS OF TRANSACTION IDENTITY OF PARTIES TO THE AGREEMENT FURTHER AS THE PAYMENT HAS MADE THROUGH A PROPER BANKING CHANNEL AFTER DEDUCTION OF TDS AND ALL RECIPIENT ARE INCOME TAX ASSESSEE AND DULY CHARGE & DEPOSIT SERVICE TAX ON THE SERVICES PROVIDERS BY THEM TO THE APPELLANT SO THE ADDITION SO MADE IS UNWARRANTED AND CAN NOT BE SUSTAINED THEREFORE IS DELETED. I DECIDE THE GROUND OF APPEAL AGAINST THE REVENUE AND IN FAVOUR OF THE APPELLANT. 11. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF C IT(A) IN DELETING THE ADDITION OF RS. 41.14 LACS. 12. THE LD. DR FOR THE REVENUE RELYING ON THE ORDER OF ASSESSING OFFICER POINTED OUT THAT THE DISPUTE WAS WITH REGAR D TO THE KIND OF SERVICES RENDERED BY THE SAID PARTIES. THE LD. DR FURTHER POINTED OUT THAT THE CIT(A) RELYING ON PAPER EVIDENCE HAD NOWHERE CONTRO VERTED THE FINDINGS OF ASSESSING OFFICER WHICH IN THE PRESENT CASE WER E THAT NO SERVICES WERE RENDERED BY THE AFORESAID PARTIES TO WHOM COMMISSIO N IS CLAIMED TO HAVE BEEN PAID. OUR ATTENTION WAS ELABORATELY DRAWN TO THE FINDINGS OF THE ASSESSING OFFICER IN RESPECT OF EACH PARTY TO WHOM COMMISSION IS ALLEGED TO HAVE PAID. IT WAS FURTHER POINTED OUT BY LD. DR THAT THE CIT(A) HAD ALLOWED THE CLAIM OF ASSESSEE MERELY BECAUSE OF PAY MENTS MADE TO PARTIES. THE LD. AR FOR THE ASSESSEE POINTED OUT T HAT THE ASSESSEE HAD 9 APPOINTED SUB AGENTS AS PER THE AGREEMENT PLACED AT PAGE 102 OF THE PAPER BOOK. HE FURTHER STATED THAT THE TERMS OF THE AGRE EMENT ARE NOT DISPUTED AND THE SAID AGREEMENT IS ENFORCEABLE IN LAW. THE LD. AR FURTHER SUBMITTED THAT NO DOUBTS WERE RAISED BY THE ASSESSI NG OFFICER AND THE SAME CANNOT BE CHALLENGED AND HENCE NO QUESTION OF ANY DISALLOWANCE. IN ANY CASE THE ASSESSING OFFICER BEFORE MAKING THE DISALLOWANCE HAD NOT CONFRONTED THE ASSESSEE WITH THE SAME. THE LD. A R FURTHER DREW OUR ATTENTION TO THE DETAILS OF COMMISSION FURNISHED AT PAGE 9 OF THE PAPER BOOK AND POINTED OUT THAT THE FURTHER DETAILS INCLU DED AGREEMENT/S WITH SUB AGENTS FOR PROVIDING LIASONING SERVICES. THE NEXT PLEA OF THE LD. AR WAS THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASS ESSMENT FOR ASSESSMENT YEAR 2005-06 ALLOWED SIMILAR CLAIM OF THE ASSESSEE. A REFERENCE WAS MADE THE COPY OF THE ORDER U/S 143(3) OF THE ACT PLACED AT PAGES 83 AND 84 OF THE PAPER BOOK. IN RESPECT OF THE RELIANCE BY THE ASSESSING OFFICER ON AMSON TOOLS MANUFACTURE CORPORATION LTD VS. CIT (29 6 ITR 30)(P&H)] THE LD. AR POINTED OUT THAT THE SAID PROPOSITION IS NOT STRICTLY APPLICABLE TO THE ASSESSEE AS IT DEALS WITH A CASE OF COMMISSI ON BEING PAID TO PERSONS HAVING NEGLIGIBLE INCOME AND THERE BEING NO WRITTEN CONTRACT. THE LD. AR WAS OF THE VIEW THAT UNDER THE PROVISIONS OF SECTIO N 37 OF THE ACT ANY EXPENDITURE INCURRED FOR THE PURPOSES OF BUSINESS I S AN ALLOWABLE EXPENDITURE. IT WAS FURTHER POINTED OUT THAT IN TH E PRESENT CASE THERE IS NO FINDING THAT THE EXPENDITURE INCURRED IS A CAPITAL EXPENDITURE AND FURTHER IT HAS NOT BEEN LAID FOR THE PURPOSE OF BUSINESS. FU RTHER IT WAS POINTED OUT THAT THE PARTIES HAVE CONFIRMED TO THE RECEIPTS OF PAYMENTS AND IN THE ABSENCE OF ANY CROSS VERIFICATION THERE IS NO MERIT IN THE SAID DISALLOWANCE. THE LD. AR FURTHER POINTED OUT THAT IN THE SUCCEEDING YEAR SIMILAR PAYMENT TO SAME PARTIES WAS ALLOWED AS A DE DUCTION VIDE ORDER PASSED U/S 143(1) OF THE ACT. 10 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD CL AIMED EXPENDITURE OF RS. 41.14 LACS ON ACCOUNT OF LIASON CHARGES PAID. THE ASSESSEE WAS CARRYING ON COMMISSION BUSINESS OF HANDLING CUM SAL ES PROMOTION FOR M/S J.K. CEMENT WORKS. IN ADDITION THE ASSESSEE WAS E ARNING LIASON COMMISSION FROM M/S SSTPL FOR SOLICITING PRODUCTS O F M/S J.K. CEMENT WORKS TO THE GOVERNMENT AND SEMI GOVERNMENT ORGANIZ ATIONS AND INSTITUTIONAL BUYERS. DURING THE YEAR UNDER CONSIDE RATION THE ASSESSEE HAD RECEIVED TOTAL COMMISSION OF RS. 55 86 869/- AGAINS T WHICH THE PAYMENT TO SUB AGENTS WAS CLAIMED AT RS. 41 14 518/-. THE A SSESSEE CLAIMS TO HAVE MADE THE SAID PAYMENTS TO THE UNDER MENTIONED PARTI ES AS DETAILED AT PAGE 9 OF THE PAPER BOOK WHICH ARE AS UNDER:- NAME OF THE PARTY INV.NO DATE LIASON AMOUNT OF COMMISSION (IN RS.) AREA (DISTT. WISE) S.K. WOOLTEX PANIPAT 643 11.02.06 8 87 693/- BHIWANI HISSAR & ROHTAK SHYAM LAL RAJNEESH KUMAR KAITHAL 1 13.03.06 2 50 000/- REWARI FARIDABAD GURGAON JIND MOHINDERGARH SIRSA SONEPAT PANIPAT KAITHAL TEK CHAND SHYAM LAL KAITHAL 195 13.3.06 3 50 000/- REWARI FARIDABAD GURGAON JIND MOHINDERGARH SIRSA SONEPAT PANIPAT KAITHAL PUNJAB ENGG. WORKS DISTT. PATIALA 81 20.03.06 14 28 891/- REWARI FARIDABAD GURGAON JIND MOHINDERGARH SIRSA SONEPAT PANIPAT KAITHAL PUNJAB ENGG. WORKS 88 30.03.06 4 60 987/- REWARI 11 DISTT. PATIALA FARIDABAD GURGAON JIND MOHINDERGARH SIRSA SONEPAT PANIPAT KAITHAL RAJASTHANI ENGG. WORKS RAJGARH 88 31.03.06 7 46 9547/- REWARI FARIDABAD GURGAON JIND MOHINDERGARH SIRSA SONEPAT PANIPAT KAITHAL 41 14 518/- 14. THE CLAIM OF THE ASSESSEE IS THAT IT HAD ENTER ED INTO AN AGREEMENT WITH M/S SSTPL FOR PROVIDING SERVICES OF A SERVICE AGENT. THE COPY OF AGREEMENT DATED 18.5.2005 IS PLACED AT PAGES 6 & 7 OF THE PAPER BOOK. AS PER THE TERMS OF SAID AGREEMENT THE ASSESSEE WAS A PPOINTED AS SERVICE AGENT FOR SUPPLY OF MATERIAL TO DIRECTOR SUPPLIES A ND DISPOSALS (DS&D). THE SAID AGREEMENT WAS EXECUTED ON 18.5.2005 AND WA S VALID UPTO 31.3.2006. AS PER CLAUSE (2) IT WAS AGREED UPON T HAT M/S SSTPL WOULD SUPPLY QUANTITY ON THE RECOMMENDATION OF THE ASSESS EE AND AS PER CLAUSE (3) THE BILLS WERE TO BE SUBMITTED TO THE AUTHORIT IES IN TIME AND PAYMENT AGAINST THE SAME WAS TO BE RECEIVED WITHIN STIPULAT ED PERIOD. FOR THE ABOVE SAID SERVICES COMMISSION AS NEGOTIATED SUBJ ECT TO MATURITY OF CONTRACT WITH DS&D WAS TO BE PAID TO THE ASSESSEE AS PER CLAUSE (8) OF THE AGREEMENT. AS PER CLAUSE (9) OF THE AGREEMENT IT WAS AGREED UPON THIS AGREEMENT SHALL NOT BE ASSIGNED OR CHARGED OR MORTGAGED BY YOU IN FAVOUR OF ANY OTHER PARTY . M/S SSTPL VIDE LETTER DATED 30.5.2005 CONFIRMED THAT THE COMMISSION ON ALL THE SUPPLIES T O THE DEPARTMENT SHALL BE MADE @ RS. 25 PMT. A COPY OF THE SAID LETTER IS PLACED AT PAGE 109 OF THE PAPER BOOK. 12 15. IN RESPECT OF THE COMMISSION PAID TO VARIOUS EN TITIES THE ASSESSEE CONFIRMS TO HAVE ALLOTTED THE AREAS FOR LIASONING T O THE SISTER CONCERN OF M/S PUNJAB ENGINEERING WORKS (M/S PEW) SHERGARH. THE ASSESSEE CLAIMS TO HAVE ENTERED INTO A MUTUAL UNDERSTANDING WITH M/S PEW THROUGH ITS PARTNERS SHRI RAJNEESH GARG VIDE LETTER DATED 8 .4.2005 PLACED AT PAGE 1 OF THE PAPER BOOK. AS PER THE SAID UNDERSTANDING M/S PEW WAS RESPONSIBLE FOR COLLECTION OF PAYMENTS AND IN CASE OF ANY DISPUTES RAISED IN THE GOVERNMENT DEPARTMENT DUE TO SUPPLIES THE S AME WOULD BE SETTLED BY M/S PEW. HOWEVER M/S PEW WAS ALSO ALLOWED TO L IASON IN THE NAME OF HIS FIRM AS WELL AS SISTER CONCERN / FAMILY FIRM NAME. THE AGREED LIASON COMMISSION WAS @ RS. 20 PMT FOR THE PERIOD. AT PAGES 2 & 3 OF THE PAPER BOOK ARE PLACED COMMUNICATIONS BETWEEN TH E ASSESSEE AND M/S PEW DATED 1.4.2005 AND 5.4.2005. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ISSUED SUMMONS U /S 133 (6) TO VARIOUS PARTIES TO WHOM COMMISSION WAS PAID. THE ASSESSEE HAS ENCLOSED THE COPIES OF THE SUMMONS ISSUED TO VARIOUS PARTIES ALO NG WITH COPIES OF INVOICE RAISED BY EACH PARTY COPY OF ACCOUNT OF TH E ASSESSEE IN THE RESPECTIVE BOOKS OF ACCOUNT OF THE SAID PARTY/S AND IN SOME CASES BANK STATEMENTS OF THE RESPECTIVE PARTIES. THE COPIES OF THE ABOVESAID COMMUNICATIONS ARE PLACED AT PAGES 10 TO 52 OF THE PAPER BOOK. THE PERUSAL OF THE BILL RAISED BY M/S S.K. WOLTEX AT PA GE 13 REVEALS THAT THE LIAISONING CHARGES ARE CHARGED AGAINST ORDER NO. 23 DATED 12.7.2004 OF DS&D HARYANA. THE TOTAL COMMISSION EXCLUDING SERV ICE TAX WAS RS. 8 77 693/-. THE QUANTITY SUPPLIED HAS BEEN MENTION ED IN THE SAID INVOICE HOWEVER THE BILL WISE AND DATE WISE DETAILS OF QUA NTITY SUPPLIED HAS NOT BEEN FURNISHED ON RECORD AS ADMITTED BY THE PARTIE S U/S 131 / 133(6) OF THE ACT. ONE BILL WAS RAISED AT THE CLOSE OF THE YEAR IN RESPECT OF TOTAL SERVICE CHARGES TO BE RECEIVED. THE SECOND PARTY TO WHOM SERVICE 13 CHARGES HAS BEEN PAID IS M/S SHAM LAL RAJNEESH KUMA R AND THE COPY OF THE INVOICE IS PLACED AT PAGE 18 OF THE PAPER BOOK. HOWEVER THE SAID INVOICE DOES NOT DETAIL THE QUANTITY OR THE ITEMS A GAINST WHICH THE COMMISSION HAS BEEN PAID. THE TOTAL COMMISSION PAI D TO THE SAID PARTY WAS RS. 2 50 000/-. SIMILARLY THE BILL OF M/S TE K CHAND SHYAM LAL OF RS. 3 50 000/- IS PLACED AT PAGE 25 OF THE PAPER BO OK AND THE SAID INVOICE DO NOT DETAIL THE QUANTITY SUPPLIED OR THE PARTIES TO WHOM THE SUPPLIES WERE MADE. THE INVOICE RAISED BY M/S PEW ARE PLACE D AT PAGES 37 & 38 OF THE PAPER BOOK IN WHICH IT HAS BEEN MENTIONED TH AT COMMISSION IS CHARGED ON SUPPLIES MADE TO DS&D HARYANA AT VARIOU S STATIONS AND THE TOTAL QUANTITY SUPPLIED IS ALSO MENTIONED. THE FIR ST INVOICE NO. 81 DATED 20.3.2006 IS FOR A TOTAL CONSIDERATION OF RS. 14 28 891/- AND THE SECOND INVOICE NO. 88 DATED 30.3.2006 IS FOR A CONSIDERATI ON OF RS. 4 60 987/-. THE TWO INVOICES ARE PLACED AT PAGES 37 & 38 OF THE PAPER BOOK. THE COMMISSION OF RS. 7 46 947/- HAS BEEN PAID TO M/S R AJASHANTI ENGG. WORKS AND THE COPY OF THE INVOICE IS PLACED AT PAGE 47 OF THE PAPER BOOK. THE INVOICE NO. 88 DATED 31.3.2006 IS IN RESPECT OF COMMISSION CHARGED ON SUPPLIES TO DS&D HARYANA AT VARIOUS STATIONS. THE ASSESSABLE VALUE IS MENTIONED IN THE SAID INVOICE HOWEVER NO PARTY WISE AND DATE WISE DETAILS OF THE SUPPLIES MADE HAVE BEEN GIVEN BY THE ASSESSEE. 16. DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E ASSESSEE VIDE LETTER DATED 12.9.2008 PLACED AT PAGES 53 & 54 OF THE PAPER BOOK BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT THE ASS ESSEE WAS PROVIDING LIAISONING SERVICES TO M/S SSTPL NEW DELHI BY SOLI CITING THE PRODUCTS OF THE COMPANY. IT WAS FURTHER CLARIFIED THAT THE BILL S FOR SUCH SERVICES ARE RAISED ON MONTHLY BASIS. HOWEVER THE PAYMENT THEREOF ARE RECEIVED VERY LATE OBVIOUSLY ON THE COMPLETION OF THE RELATED TR ANSACTIONS OF SUPPLY AT 14 THE END OF THE COMPANY CONCERN AND PAYMENTS ARE REC EIVED FROM THE PURCHASERS CONCERNED. THE DETAILS OF MONTH WISE BILLS RAISED BY THE ASSESSEE WERE CLAIMED TO HAVE BEEN ALREADY FILED. THE ASSESSEE FURNISHED A CHART SHOWING THE AMOUNT ACTUALLY RECEIVED WHICH REFLECTED THE ASSESSEE NOT TO HAVE RECEIVED THE PAYMENTS ON MONTH LY BASIS AND A SUM OF RS. 15 83 538/- DUE ON 31.3.2006 WAS RECEIVED IN M AY 2006 AND JULY 2006 ONLY. THE PAYMENTS IN RELATION TO THE EXPENDI TURE INCURRED WERE CLAIMED TO HAVE BEEN CLEARED BY 31.3.2006. THE CH ART SHOWING THE RECEIPTS / PAYMENTS IN RESPECT OF LIAISONING SERVIC ES FOR THE PERIOD CONCERNED IS PLACED PAGE 55 OF THE PAPER BOOK UNDER WHICH THE EXPENSES IN CONNECTION WITH LIAISONING WERE PAID BY 31.3.200 6 AS AGAINST THE RECEIPTS NOT BEING RECEIVED UP TO 31.3.2006. THE ASSESSEE HAS ALSO FURNISHED ON RECORD THE COPIES OF ACCOUNT OF THE RE SPECTIVE PARTIES WHICH REFLECT THE PAYMENTS VIDE CHEQUES TO THE SAID PARTI ES ON VARIOUS DATES UPTO 31.3.2006. THE RESPECTIVE PARTIES HAVE FURNISHED ON RECORD THE COPIES OF BANK STATEMENT REFLECTING THE RECEIPTS OF THE SAID AMOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER RECORDED STATEMENTS OF THE VARIOUS PERSONS TO WHOM THE SAID LIASON COMMISSION HAS BEEN PAID WHICH HAVE BEEN REFERRED TO BY US IN THE PARAS HEREINABOVE. THE SAID PARTIES THOUGH ADMIT TO HAVE RECEIVED THE PAYMENTS BUT HAVE FAILED TO FURNISH THE DETAILS OF NAMES ADDRESS PL ACES OF THE PARTIES AND QUANTITY OF THE CEMENT SUPPLIED DATE WISE AND PARTY WISE DURING THE YEAR. THE BILLS REFLECT THE QUANTITY SUPPLIED DURING THE YEAR (CONSOLIDATED ) IN RESPECT OF THE SOME OF THE PARTIES BUT THE DETAILS ABOUT THE COMMODITY QUANTITY RATE OF COMMISSION CHARGED AND PLACES OF SUPPLIES ARE MISSING FROM THE SAID BILLS. THE MAIN CONCERN M/S PEW HAS NOT MAINTAINED THE DAY TO DAY RECORD OF LIAISONING COMMISSION. THE SAI D PARTIES HAVE FAILED TO BRING ON RECORD ANY DOCUMENTARY EVIDENCE OF REND ERING THE SERVICES 15 EXCEPT FOR THE COPIES OF BILLS RAISED AND COPIES OF THE ACCOUNT OF THE ASSESSEE IN THEIR BOOKS OF ACCOUNT. WHEN CONFRONTE D SHRI RAJNEESH GARG PARTNER OF M/S PEW CONFIRMED THAT HE WAS CARRYING O N THE BUSINESS OF MANUFACTURING IRON AND STEEL AND SALE AND PURCHASE OF IRON SCRAP. HE FURTHER CONFIRMS THAT HE HAD ENTERED IN AN AGREEMEN T WITH THE ASSESSEE WHERE HE WOULD BE RESPONSIBLE FOR COLLECTION OF PAY MENTS AND SETTLEMENT OF DISPUTES. WHEN CONFRONTED AS TO THE QUANTUM OF COLLECTION MADE AND DISPUTES SETTLED HE DEPOSES THAT PURCHASERS USED T O SEND MONEY DIRECTLY TO M/S J.K. CEMENT AND NO DISPUTE AROSE IN THE TERR ITORY. THE PARTNER OF M/S RAJASTHANI ENGINEERING WORKS WHEN CONFRONTED S TATED NOT TO HAVE ENTERED INTO ANY TRANSACTIONS IN PERSON WITH THE AS SESSEE AND THAT HIS FIRM HAD NO WRITTEN CONTRACT WITH THE ASSESSEE. HE ALSO FAILED TO BRING ON RECORD ANY EVIDENCE OF RENDERING THE SERVICES TO TH E ASSESSEE EXCEPT FOR RAISING THE BILLS OF COMMISSION RECEIVABLE AT THE E ND OF THE YEAR. HOWEVER THE SAID FIRM DID NOT PRODUCE THE BOOKS OF ACCOUNT REGARDING ITS BUSINESS WITH THE ASSESSEE. THE STATEMENT OF SHRI S.K.CHHABRA PROPRIETOR OF M/S S.K. WOLTEX WAS ALSO RECORDED. H E COULD NOT EXPLAIN THE NATURE OF SERVICES RENDERED AND NOR ANY BASIS F OR RAISING THE BILLS OF SERVICE CHARGES COULD BE EXPLAINED. 17. IN THE FACTS AND CIRCUMSTANCES OF THE CASE BEFO RE US THE ROLE OF THE ASSESSEE VIS-A-VIS SERVICES TO BE PROVIDED TO M/S SSTPL LTD WAS TO GET THE ORDERS FROM THE GOVERNMENT AND SEMI-GOVERNMENT ORGANIZATION AND OTHER INSTITUTIONAL BUYERS AND TO ENSURE TIMELY SCH EDULE FOR SUPPLIES AND TIMELY PAYMENTS AGAINST SUCH SUPPLIES. THE SAID SE RVICES WERE BEING PROVIDED BY THE ASSESSEE TO M/S SSTPL AGAINST WHICH IT WAS ENTITLED TO LIASON COMMISSION AS PER THE AGREEMENT ENTERED INTO BETWEEN PARTIES. THE ASSESSEE ADMITTEDLY WAS MAINTAINING OFFICES IN PATI ALA AND BHATINDA AND 16 HIS EMPLOYEES WERE LOOKING AFTER ACTIVITIES IN THE STATE OF PUNJAB. FURTHER CLAIM OF THE ASSESSEE WAS FOR PROVIDING THE SERVICES IN THE STATE OF HARYANA THE ASSESSEE ENGAGED SERVICE PROVIDERS AND SUB AGENTS FOR THE SAID PURPOSE. THE ASSESSEE HAD RECEIVED COMMISSION @ 25 PMT FOR RENDERING SERVICES TO M/S SSTPL AND IN TURN THE ASS ESSEE ALLEGES TO HAVAE PAID LIASON COMMISSION @ RS. 20 PMT TO THE SERVICE PROVIDERS. THE ISSUE RAISED BEFORE US IS IN RESPECT OF THE AFORESA ID PAYMENTS BEING MADE TO THE SERVICE PROVIDERS. THE ASSESSEE WHILE MAKIN G THE PAYMENTS ADMITTEDLY HAD DEDUCTED TDS AND SERVICE TAX AS APPL ICABLE AND ITS CLAIM WAS THAT SIMILAR PAYMENTS WERE BEING ALLOWED IN THE EARLIER YEARS. THE ASSESSEE HAD FURNISHED ON RECORD A CHART RELATING T O THE LIASON COMMISSION PAID FOR THE FINANCIAL YEARS 2003-04 TO 2006-07. FROM THE PERUSAL OF THE SAID CHART WE FIND THAT IN THE EARLIER YEARS THE SAID LIASON COMMISSION WAS BEING PAID TO THE PARTIES OTHER THAN M/S PEW M /S RAJNEESH ENGINEERING WORKS AND M/S S.K. WOLTEX. THE ASSESSE E DURING THE YEAR UNDER APPEAL I.E. FINANCIAL YEAR 2005-06 HAD ALSO P AID COMMISSION TO M/S TEK CHAND SHAM LAL AND M/S SHAM LAL RAJNEESH KUMAR TO WHOM COMMISSION WAS PAID IN THE FINANCIAL YEAR 2003-04 A LSO. THE ALLOWABILITY OF COMMISSION IN ASSESSMENT YEAR 2005-06 HAS NO BEA RING AS THE PARTIES ARE DIFFERENT. IN THE SUCCEEDING YEAR I.E. FINANCI AL YEAR 2006-07 COMMISSION HAS BEEN PAID TO THE PARTIES AS IN THE F INANCIAL YEAR 2005-06. THE STAND OF THE ASSESSEE THAT SIMILAR PAYMENTS HAV E BEEN ALLOWED IN THE SUCCEEDING YEARS HAS NO BEARING TO THE ALLOWABLILIT Y OF CLAIM DURING THE YEAR AS NO INVESTIGATION WAS MADE IN THE SUCCEEDING YEAR AND ONLY INTIMATION WAS ISSUED U/S 143(1) OF THE ACT. THE BASIS FOR DISALLOWING THE COMMISSION IS THE INVESTIGATION CARRIED OUT BY THE ASSESSING OFFICER AND THE STATEMENT RECORDED OF THE VARIOUS PERSONS T O WHOM THE AFORESAID COMMISSION IS CLAIMED TO HAVE BEEN PAID. IN THE SA ID STATEMENT RECORDED 17 NONE OF THE PARTIES HAVE BEEN ABLE TO JUSTIFIABLY E XPLAIN THE NATURE AND SERVICES OFFERED BY THEM ENTITLING THEM TO THE RECE IPT OF THE COMMISSION. EVEN THE DETAILS OF SERVICES RENDERED PARTY-WISE ON WHICH COMMISSION WAS DUE COULD NOT BE FORWARDED BY THE SAID PARTIES. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE WHERE THE ASSESSEE H AS FAILED TO EXPLAIN WITH EVIDENCE THE NATURE OF SERVICES BEING RENDERED BY THE SUB AGENTS DISENTITLES IT TO THE CLAIM OF DEDUCTION ON ACCOUNT OF THE SERVICE CHARGES. MERELY BECAUSE CERTAIN BILLS HAVE BEEN RAISED AND P AYMENTS AGAINST THE SAME HAVE BEEN RELEASED BY THE ASSESSEE DOES NOT E NTITLE THE ASSESSEE TO CLAIM OF DEDUCTION ON ACCOUNT OF SAID EXPENDITURE IN THE ABSENCE OF THE ASSESSEE ESTABLISHING THAT THE SAID EXPENDITURE HA D BEEN LAID DOWN WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE SAID PARTIES HAD FAILED TO BRING ON RECORD THE EXACT NAT URE OF SERVICES RENDERED AND EVEN THE QUANTITATIVE DETAILS OF THE SERVICES V IS-A-VIS DATE WISE AND PARTY WISE DETAILS TO WHOM SUPPLIES WERE MADE ON BE HALF OF THE ASSESSEE WERE NOT FURNISHED EXCEPT FOR RAISING A CONSOLIDAT ED BILL AT THE END OF THE YEAR. THE ACCEPTANCE OF ALLOWABLILITY OF THE SAI D EXPENDITURE IN THE SUCCEEDING YEAR VIDE INTIMATION ISSUED US/ 143(1) O F THE ACT AS AGAINST THE EVIDENCE AND MATERIAL COLLECTED BY THE ASSESSING OF FICER DURING THE YEAR DOES NOT ESTABLISH THE CLAIM OF THE ASSESSEE IN RES PECT OF THE ALLOWABLILITY OF THE SAID EXPENDITURE. FURTHER WE FIND THAT THE ALLEGED AGREEMENT WITH M/S PEW WAS ENTERED INTO BY THE ASSESSEE ON 8.4.200 5 WHEREAS THE ASSESSEE WAS APPOINTED AS SERVICE AGENT BY M/S SSTP L VIDE APPOINTMENT LETTER DATED 18.5.2005. EVEN THE SAID APPOINTMENT LETTER DEBARRED THE ASSESSEE FROM ASSIGNING THE AGREEMENT WITH M/S SSTP L IN FAVOUR OF ANY OTHER PARTY. IN THE TOTALITY OF FACTS AND CIRCUMST ANCES WE FIND NO MERIT IN THE ORDER OF THE CIT(A) IN ALLOWING THE CLAIM OF TH E ASSESSEE ON THE BASIS 18 OF EXISTENCE OF AGREEMENT WITH ONE OF THE SUB AGENT S AND ADMISSION OF RECEIPTS OF PAYMENTS BY THE PARTIES. 18. IN THE YEAR UNDER APPEAL THE ASSESSING OFFICER HAS RECORDED THE STATEMENTS OF SHRI RAJNEESH GARG IN CONNECTION WITH SHAM LAL RAJNEESH KUMAR AND TEK CHAND SHAM LAL WHICH ADMITTEDLY ARE T HE SISTER CONCERN OF M/S PEW AND IN HIS STATEMENT THE SAID PERSONS HA D FAILED TO ESTABLISH ITS CASE OF RENDERING THE SERVICES TO THE ASSESSEE. SHRI RAJNEESH GARG IN HIS STATEMENT ADMITTED TO HAVE BEEN CARRYING ON THE BUSINESS OF MANUFACTURE OF IRON AND STEEL AND SALE OF IRON SCRA P AND HAS COMPLETELY DENIED HIS CARRYING ON ANY BUSINESS IN THE FIELD OF CEMENT. WHEN QUESTIONED ABOUT THE NATURE OF SERVICES PROVIDED H E REPLIED THAT HE WAS COLLECTING THE PAYMENTS ON BEHALF OF THE ASSESSEE BUT IN REPLY TO ANOTHER QUESTION IT WAS EXPLAINED BY HIM THAT THE PAYMENTS IN CONNECTION WITH THE SUPPLIES WERE DIRECTLY MADE BY THE PARTIES TO M/S J .K.CEMENT WORKS. THE ASSESSING OFFICER ALSO PUT TO HIM TO GIVE THE DETAI LS OF DISPUTE/S SETTLED AGAINST WHICH HE WAS PAID COMMISSION IF ANY AND I N HIS REPLY HE STATED NOT TO HAVE SETTLED ANY DISPUTES. THE SAID STATEME NT OF SHRI RAJNEESH GARG WAS GIVEN ON BEHALF OF M/S PEW AND OTHER CONCE RNS. FURTHER STATEMENT OF SHRI S.K. CHHABRA OF M/S S.K. WOLTEX W AS ALSO RECORDED AND HE ADMITS TO HAVE RECEIVED THE COMMISSION IN RESPEC T OF A SPECIFIC ORDER AND RELATED TO A PERIOD PRIOR TO THE YEAR UNDER CON SIDERATION. THE COPY OF BILL OF M/S S.K.WOOLTEX PLACED AT PAGE 13 REFLECTS THE LIASON CHARGES BEING MADE AGAINST ORDER NO. 23 DATED 12.7.2004 WHE REAS THE BILL RAISED IS DATED 11.2.2006. IN RESPECT OF M/S SHAM LAL RAJ NEESH KUMAR AND TEK CHAND SHAM LAL THE CONSOLIDATED SERVICE CHARGES HA S BEEN RAISED AND IN THE ABSENCE OF THE DETAILS OF SERVICES RENDERED BY THEM WE FIND NO MERIT IN ALLOWING THE CLAIM OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION 19 EVEN THOUGH THE ASSESSEE CLAIMS IN THE EARLIER YEAR PAYMENTS TO THE SAID PARTIES WERE ALLOWED. FURTHER THE SAID PARTIES WE RE PRODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE ASSESSING OFFIC ER HAS FAILED TO CONFRONT THE ASSESSEE WITH HIS FINDINGS BASED ON T HE STATEMENTS RECORDED BEFORE MAKING THE AFORESAID DISALLOWANCE. 19. THE SECOND ASPECT OF THE ISSUE IS THE ASSESSEE MAKING PAYMENTS DUE TO SUB AGENTS BEFORE OR BY 31.3.2006 EVEN BEFORE T HE RECEIPT OF COMMISSION FROM M/S SSTPL PART OF WHICH IS RECEIV ED IN MAY 2006 AND JULY 2006 I.E. AFTER THE CLOSE OF THE YEAR. THE LIASON COMMISSION WAS TO BE RECEIVED BY THE ASSESSEE AFTER THE PARTIES TO WH OM THE SUPPLIES HAVE BEEN MADE HAD CLEARED THEIR DUES AND DISPUTE IF AN Y IN RESPECT OF THE SUPPLIES SETTLED WITH THE SAID PARTIES BY THE ASSES SEE ON BEHALF OF M/S SSTPL. WE FIND NO JUSTIFICATION IN THE CLAIM OF TH E ASSESSEE IN RESPECT OF THE LIASON EXPENSES PAID WHICH ADMITTEDLY WERE CLEA RED UP TO MARCH 2006 IN RESPECT OF THE COMMISSION BEING RECEIVED FROM TH E PRINCIPALS WHICH BECOMES DUE ON SETTLEMENT OF THE PAYMENTS SCHEDULE AND ALSO SETTLEMENTS OF DISPUTES REGARDING SCHEDULE IF ANY. UNDOUBTED LY THE INCURRING OF EXPENDITURE BY THE BUSINESS MAN CANNOT BE QUESTIONE D BUT THE ALLOWABLILITY OF THE SAID EXPENDITURE IS COVERED UN DER THE PROVISIONS OF THE INCOME TAX ACT WHICH LAY DOWN THAT ALL SUCH E XPENDITURE WHICH IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF CARRYING ON OF THE BUSINESS IS TO BE ALLOWED AS AN EXPENDITURE. THE ONUS IS UPON THE ASSESSEE TO ESTABLISH THAT IT HAD INCURRED A PARTIC ULAR EXPENDITURE FOR THE PURPOSE OF CARRYING ON OF ITS BUSINESS. THE SECOND LIMB OF SECTION 37 OF THE I.T.ACT OF INCURRING THE EXPENDITURE FOR THE PURPOSE OF BUSINESS HAVE NOT BEEN SATISFACTORILY ESTABLISHED BY THE ASS ESSEE. IN VIEW OF THE 20 EVIDENCE COLLECTED BY THE ASSESSING OFFICER AND THE STATEMENT RECORDED OF THE SUB AGENTS WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE IN RESPECT OF THE LIASON COMMISSION PAID BY IT WHICH IN ANY C ASE IS DEBARRED FROM VIS-A-VIS TERMS OF AGREEMENT ENTERED BETWEEN THE AS SESSEE AND ITS PRINCIPAL M/S STPL. THE SAID EXPENDITURE BEING ALLO WED IN THE EARLIER YEAR UNDER ORDER PASSED U/S 143(3) DOE NOT ESTABLI SH THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AS THE PA RTIES TO WHOM COMMISSION WAS PAID FOR ASSESSMENT YEAR 2004-05 AR E COMPLETELY DIFFERENT AND IN RESPECT OF THE PARTIES IN ASSESSME NT YEAR 2003-04 THOUGH THERE WAS TWO COMMON PARTIES BUT THE ASSESSEE HAS FAILED TO FURNISH ON RECORD THE EVIDENCE IN RESPECT OF THE SERVICES REND ERED IN FINANCIAL YEAR 2003-04 BY THE SAID PARTIES FOR WHICH COMMISSION WA S ALLOWED. WE FIND SUPPORT FROM THE RATIO LAID DOWN IN EMSON TOOLS MAN UFACTURING CORPORATION LTD VS. CIT (SUPRA). ACCORDINGLY REVE RSING THE ORDER OF CIT(A) WE CONFIRM THE ORDER OF ASSESSING OFFICER I N MAKING AN ADDITION OF RS. 41 14 518/-. THE GROUNDS OF APPEAL RAISED B Y THE REVENUE ARE THUS ALLOWED. ITA NO.741/CHD/2009 (ASSESSEES APPEAL) 20. THE ONLY ISSUE RAISED IN THE APPEAL FILED BY TH E ASSESSEE IS AGAINST THE ADDITION OF RS. 3 02 690/- MADE U/S 69C OF THE ACT FOR UNEXPLAINED HOUSE HOLD EXPENSES. 21. THE ASSESSING OFFICER ESTIMATED THE HOUSE HOLD EXPENSES AT RS. 4 20 000/- AS AGAINST THE ASSESSEE CLAIMING THE SAM E AT RS. 45 310/-. THE ASSESSEE FURTHER SUBMITTED THAT HIS SON-IN-LAW WHO WAS STAYING WITH HIM HAD CONTRIBUTED RS. 72 000/- TO THE HOUSE HOLD EXPE NSES. THE ASSESSING 21 OFFICER TABULATED THE MONTH WISE WITHDRAWALS MADE B Y THE ASSESSEE FOR HOUSE HOLD EXPENSES ELECTRICITY AND TRAVEL EXPENSE S. THE TOTAL CASH WITHDRAWALS FOR HOUSE HOLD EXPENSE WERE RS. 19 500/ - AND RS. 5 630/- FOR ELECTRICITY AND RS. 1 434/- FOR TRAVELING. THE TOTAL WITHDRAWAL OUT OF CAPITAL ACCOUNT OF THE ASSESSEE WAS RS. 26 564/-. THE SIZE OF THE FAMILY OF THE ASSESSEE CONSISTED OF FOUR MEMBERS AND THE A SSESSING OFFICER AS DETAILED AT PAGE 31 ESTIMATED THE HOUSE HOLD EXPENS ES MONTH-WISE TOTALING RS. 35 000/- PER MONTH. THE ASSESSING OFFICER ESTI MATED THE EXPENDITURE AT RS. 4 20 000/- AND AFTER ALLOWING THE EXPENDITUR E SHOWN BY THE ASSESSEE AT RS. 1 17 310/- MADE AN ADDITION OF RS. 3 02 690/ - ON ACCOUNT OF UNEXPLAINED EXPENDITURE OF HOUSE HOLD EXPENSES. TH E CIT(A) UPHELD THE ORDER OF THE ASSESSING OFFICER AS THE ASSESSEE HAD FAILED TO SUBMIT ANY POSITIVE EVIDENCE TO JUSTIFY THE HOUSE HOLD EXPENS ES RELATING TO THE SIZE OF THE FAMILY AND HIS LIVING STANDARD. 22. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORDS. THE TOTAL WITHDRAWALS MADE BY THE ASSESSEE DURING THE P ERIOD WAS RS. 45 310/- ON ACCOUNT OF HOUSE HOLD EXPENSES WHEREAS THE FAMIL Y OF THE ASSESSEE CONSISTED OF FOUR MEMBERS. THE ASSESSEE CLAIMED TH AT HIS SON-IN-LAW CONTRIBUTED RS. 72 000/- TOWARDS HOUSE HOLD EXPENSE S AND THE CREDIT FOR THE TOTAL WITHDRAWALS OF RS. 1 17 310/- WAS ALLOWED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAD ESTIMATED THE MONTHLY EXPENDITURE OF ASSESSEE AND MADE ADDITION OF RS. 3 02 690/-. HOWE VER NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO ESTABLISH THE INCURRENCE OF EXPENDITURE OVER AND ABOVE THE AMOUNT CLAIMED BY THE ASSESSEE. IN THE ABSENCE OF THE SAME WE FIND NO M ERIT IN THE ADDITION MADE BY THE ASSESSING OFFICER AND THE SAME IS DELET ED. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 22 ITA NOS.697 & 741/CHD/2009 23. IN THE RESULT THE APPEAL OF THE REVENUE AND AS SESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF FEBRUARY 2011. SD/- SD/- (N.BARATHVAJA SANKAR) (SUSHMA CHOWLA) VICE PRESIDENT JUDICIAL MEMBER DATED : 23 RD FEBRUARY 2010 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR