Income Tax Officer-25(3)(2), C-11, Room No.306, Pratyakshakar Bhavan, Bandra-Kurla Complex, Bandra (E), Mumbai-400051 Vs. Shri Deepak Popatlal Gala, 13, Laxmi Villa Bunglow, Thakur Complex, Opp.Police Stn. Kandivali (E), Mumbai-400067
March, 30th 2015
, " "
IN THE INCOME TAX APPELLATE TRIBUNAL" D" BENCH, MUMBAI
BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, (JM)
.. , ,
( / Assessment Year : 2010-2011)
Income Tax Officer-25(3)(2), / Shri Deepak Popatlal Gala,
C-11, Room No.306, 13, Laxmi Villa Bunglow,
Vs. Thakur Complex, Opp.Police Stn.
Bandra-Kurla Complex, Kandivali (E),
Bandra (E), Mumbai-400067
( /Appellant) .. ( / Respondent)
( / Assessment Year : 2010-2011)
Shri Deepak Popatlal Gala, / Income Tax Officer-25(3)(2),
13, Laxmi Villa Bunglow, C-11, Room No.306,
Thakur Complex, Opp.Police Stn. Vs. Pratyakshakar Bhavan,
Kandivali (E), Bandra-Kurla Complex,
Mumbai-400067 Bandra (E),
( /Appellant) .. ( / Respondent)
. / . /PAN/GIR No. :AAACPG5768P
/ Revenue by Shri Love Kumar
/ Assessee by Shri Bhupendra Shah
/ Date of Hearing : 11.3.2015
/Date of Pronouncement :27. .3.2015
/ O R D E R
Per B.R.BASKARAN, Accountant Member:
These cross-appeals are directed against the order dated
22.07.2013 passed by the ld. CIT(A)-35, Mumbai and they relate to
assessment year 2010-11.
2 ITA. No.5920/Mum/2013
2. The assessee is aggrieved by the decision of ld. CIT(A):
a) in confirming the disallowance of export commission;
b) in deleting the interest u/s 234B, 234C and 234D and setting
aside the initiation of penalty proceedings u/s 271(1)(c) of the
Income Tax Act, 1961 (the Act).
3. The Revenue is also in appeal in respect of following issues :
a) Allowing interest expenditure claimed against the house
b) Deleting the addition made u/s 69C of the Act relating to
4. We have heard the parties and perused the records. The assessee is
a wholesaler in hardware items. He filed his return of income for the year
under consideration declaring a total income of Rs.14.06 lakhs. However,
the AO computed the total income at Rs.70.50 lakhs. In the appellate
proceedings, the assessee got partial relief and hence both the parties are
in appeal before us in respect of the issues cited above.
5. We shall first take up the appeal filed by the assessee. The first
issue relates to the disallowance of export commission of Rs.14.39 lakhs
claimed by the assessee. The AO noticed that the assessee has not
deduced tax at source on the commission expenses claimed by him. It
was noticed that the commission payment was made to one Shri Pinkesh
Gala. The AO asked the assessee to furnish the details of commission paid
along with the details of services rendered by the agent and also the
reasons for not deducting the tax at source. The assessee submitted that
the Shri Pinkesh Gala is a non-resident and he is operating from outside
India. Further, it was submitted that the agent does not have any
permanent establishment in India. Accordingly, it was submitted that the
3 ITA. No.5920/Mum/2013
commission income did not accrue to Shri Pinkesh Gala in India and hence
it is not taxable in his hands in India. Accordingly, it was submitted that
there was no requirement to deduct tax at source from the payment made
to Shri Pinkesh Gala. However, the AO took the view that the commission
agent has earned income from business connection in India and further
the AO also invoked Explanation-II given below to Section 195 of the Act.
Accordingly, the AO took the view that the assessee should have deducted
tax at source from the Commission payment and since there was failure to
do so, he disallowed commission expenditure of Rs.14.39 lakhs by invoking
the provisions of section 40(a)(i) of the Act. The AO also placed reliance
on the decision rendered by Authority for Advance Ruling in the case of
M/s SKF Boilers and Driers Pvt.Ltd. The ld.CIT(A) also confirmed the
6. Before us, the ld. AR placed reliance on the decision of Mumbai
Bench of the Tribunal in the case of M/s Indo Industries Limited V/s ITO
in ITA No.183/Mum/2014 (AY-2010-11) dated 14.11.2014, wherein the
Tribunal has held that commission paid to the agents located outside India
does not require deduction of tax at source. We notice that the co-
ordinate Bench of the Tribunal has followed the decision rendered by the
Hon'ble Delhi High Court in the case of EON Technology Pvt Ltd (343 ITR
366) (Del) and also the decision rendered by the Hon'ble Supreme Court in
the case of GE India Technology Centre Private Limited reported in 327
ITR 456 (SC). On the other hand, the Ld D.R placed strong reliance on
the order of the Ld CIT(A) and also submitted that the assessee has failed
to furnish the details relating to alleged commission payment.
7. The Hon'ble Supreme Court in the case of GE India Technology
Centre Private Ltd (supra) has made it clear that the TDS is required to be
deducted from the payments made to a non-resident, only if any part of
4 ITA. No.5920/Mum/2013
the payment is chargeable to tax in India. Hence, there should not be any
confusion over the principles that were discussed by Hon'ble Supreme
Court on this issue. The said principles have to be applied to the facts
prevailing in a particular case. However, we notice that the assessee has
failed to furnish the details relating to commission payments and the
services rendered by the agent to the assessee. In the absence of such
details, one cannot ascertain about the nature of payment, whether Shri
Pinkesh Gala has rendered services from outside India, whether the
commission payment is chargeable as income in his hands in India.
Without ascertaining about the nature of payment, it would be difficult to
apply the Circulars of CBDT and also the decisions of Hon'ble Supreme
Court or High Courts or Tribunal. Accordingly, we are of the view that this
issue requires fresh examination at the end of the AO. Accordingly, we set
aside the order of ld. CIT(A) on this issue and restore the same to the file
of the AO with a direction to examine the same afresh by considering
about the applicability of the decisions referred supra to the facts
prevailing in the instant case. The assessee is also directed to furnish all
the details relating to expenditure that may be called by the AO.
8. The issue relating to charging of interest under the provision of the
Act is consequential in nature and the issue relating to initiation of penalty
proceedings is premature and hence they do not require any adjudication
at this juncture.
9. In the appeal by the Revenue, the first issue relates to the
allowance of interest of Rs.1,50,000/- claimed by the assessee against the
House property income. The assessment order shows that the assessee
has agreed for the disallowance of the interest so claimed, since it was
pointed to him by the AO that the housing loan was not taken in respect of
house against which the interest expenditure was claimed. However, the
5 ITA. No.5920/Mum/2013
ld. CIT(A) has allowed the claim without looking into the above facts.
Once agreed, the assessee cannot be considered to be aggrieved by the
said addition. Accordingly, we set aside the order of the ld. CIT(A) on this
issue and restore the addition made by AO.
10. The next issue relates to disallowance made out of purchases and
assessed u/s 69C of the Act. We heard the parties and perused the
record. The total purchase expenditure claimed by the assessee during the
year under consideration was Rs.7,36,27,555/-. The AO noticed that the
Sales Tax Department of Government of Maharashtra has listed out names
of certain dealers, who were alleged to have been providing
accommodation entries without doing actual business. The AO noticed that
the assessee made purchases to the tune of Rs.38.69 lakhs from two
parties named M/s Umiya Sales Agency Pvt Ltd and M/s Mercury
Enterprises, whose names found place in the list provided by the Sales Tax
Department. The AO placed full reliance on the enquiries conducted by
Sales Tax Department in respect of the parties, referred above.
Accordingly, the AO took the view that the purchases to the tune of
Rs.38.69 lakhs have to be treated as unexplained expenditure.
Accordingly, he assessed the same u/s 69C of the Act.
11. The ld. CIT(A) deleted the addition and hence the Revenue is in
appeal before the Tribunal.
12. The ld. DR strongly placed reliance on the order of Assessing
6 ITA. No.5920/Mum/2013
13. On the other hand, the ld. AR submitted that the additions made in
the case of some other assesses on identical reasons have been deleted by
the Co-ordinate Benches of the Tribunal in the following cases :
a) Ramesh Kumar and Co V/s ACIT in ITA No.2959/Mum/2014
(AY-2010-11) dated 28.11.2014;
b) DCIT V/s Shri Rajeev G Kalathil in ITA No.6727/Mum/2012
(AY-2009-10) dated 20.8.2014; and
c) Shri Ganpatraj A Sanghavi V/s ACIT in ITA No.
2826/Mum/2013 (AY-2009-10) dated 5.11.2014
In all the above said cases, the Co-ordinate Benches of the Tribunal has
held that the AO was not justified in making the addition on the basis of
statements given by the third parties before the Sales Tax Department,
without conducting any other investigation. In the instant case also, the
assessing officer has made the impugned addition on the basis of
statements given by the parties before the Sales tax department. We
notice that the ld.CIT(A) has taken note of the fact that no sales could be
effected without purchases. He has further placed reliance on the decision
rendered by Hon'ble Gujarat High Court in the case of CIT Vs. M.K.
Brothers (163 ITR 249). He has further relied upon the decision rendered
by the Tribunal in the cae of ITO Vs. Premanand (2008)(25 SOT
11)(Jodh), wherein it has been held that where the AO has made addition
merely on the basis of observations made by the Sales tax dept and has
not conducted any independent enquiries for making the addition
especially in a case where the assessee has discharged its primary onus of
7 ITA. No.5920/Mum/2013
showing books of account, payment by way of account payee cheque and
producing vouchers for sale of goods, such an addition could not be
sustained. The Ld CIT(A) has also appreciated the contentions of the
assessee that he was not provided with an opportunity to cross examine
the sellers, which is required to be given as per the decision of Hon'ble
Kerala High Court in the case of Ponkunnam Traders (83 ITR 508 & 102
ITR 366). Accordingly, the Ld CIT(A) has deleted the impugned addition.
On a careful perusal of the decision rendered by Ld CIT(A) would show
that the first appellate authority has analysed the issue in all angles and
applied the ratio laid down by the High Courts and Tribunals in deciding
this issue. Hence, we do not find any reason to interfere with his order on
14. In the result the appeal of the revenue is partly allowed and the
appeal of the assessee is treated as partly allowed for statistical purposes.
Pronounced accordingly in the open court on 27th Mar, 2015.
27th March, 2015
( /SANJAY GARG) ( .. / B.R. BASKARAN)
/ JUDICIAL MEMBER / ACCOUNTANT MEMBER
Mumbai: 25th March,2015.
. ../ SRL , Sr. PS
8 ITA. No.5920/Mum/2013
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)- concerned
4. / CIT concerned
5. , , /
DR, ITAT, Mumbai concerned
6. / Guard file.
/ BY ORDER,
, /ITAT, Mumbai