Commissioner Of Income Tax, Faridabad v. M/S. Septu India (P) Ltd., Begumpur, Khatola,Gurgaon

IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH ITA No. 608 of 2007 DATE OF DECISION: FEBRUARY 06, 2008 Commissioner of Income Tax, Faridabad Versus .....APPELLANT M/s. Septu India (P) Ltd., Begumpur, Khatola,Gurgaon ....RESPONDENT CORAM:HON'BLE MR.JUSTICE SATISH KUMAR MITTALHON'BLE MR.JUSTICE RAKESH KUMAR GARG--- Present:Mr.Yogesh Putney, Advocate,for the appellant. .. SATISH KUMAR MITTAL, J. The instant appeal filed by the revenue is directed against theorder dated 22.12.2006 passed by the Income Tax Appellate Tribunal,Delhi Bench “D” New Delhi (hereinafter referred to as `the ITAT') in ITANo.2011/DEL/03 in case of the respondent for the Assessment Year 1997-98 by raising the following substantial question of law:- Whether, on the facts and in the circumstances of the case,the Hon'ble ITAT was right in law in deleting the addition onaccount of commission paid though assessee failed todischarge its onus to provide any details to show that realservices were rendered by persons to whom commission hadbeen paid? In this case, the assessee had given commission ofRs.10,38,860/- on sale of machinery worth Rs.1,03,88,600/- to M/s. K.C. ITA No. 608 of 2007 -2- Cements Inds. Limited. Similarly it also paid an amount of Rs.1,29,600/-as service charges in execution of sale of plant worth Rs.10.80 lacs toM/s. Kanshi Ram Madan Lal. The Assessing Officer disallowed both the expenses on theground that the assessee failed to furnish appointment letters ofcommission agents, details of commission/service charges paid. Onappeal by the assessee, the Commissioner of Income Tax (Appeals)confirmed the said addition. On further appeal filed by the assessee, theITAT deleted the said addition while observing as under:- “We have heard the parties and perused the record of thecase. The assessee claimed to have paid comm @ 10% ofRs.10,38,860/- on sale of machinery to K.C. Cement Ltd. andRs.1,29,600/- on sale of plant to Mr. Kanshi Ram Madan Lal.The Assessing Officer disallowed the claim of the assesseeon the ground that there were no agreement of appointmentof these parties as commission agents. The Assessing Officernoticed that these parties were found to have been engaged intotally diametrically different business, one is in winebusiness and other is engaged in cement business. Theassessee claimed that commission was paid for procuringorders by these parties. The sales were made to M/s. KishanDehyration, National High Way, Bhojpura P.O., Gondal,Distt. Rajkot (Gujarat) (P.155/PB) and Neelkanth Polymers(P.160/PB). The payment of commission is made by crossaccount payee cheques. The assessee has filed the copies ofstatement of account of these parties showing the name ofbanks and cheque nos. and amount credited in their accountsat page 152 and 159 of paper book. The necessarycorrespondence entered into between the assessee and theseparties regarding procurement of orders are also placed on ITA No. 608 of 2007 -3- record (page 152 to 162/PB). There is even MOU dated25.4.96 signed with one of the parties (M/s. K.C.CementLtd.) for procurement of order which is available at page161/PB. The name of the parties and their address fromwhom supplies were made would appear from thesecorrespondence. The claim that the parties to whom thecommission was paid are assessed to tax and have shown thesame as income in their return has not been disputed by theRevenue. The Revenue has made no further enquiry withparties to whom the sale have been made by assessee toascertain as to whether the purchase orders were made bythem on account of the effort/services of these commissionagents. In the facts and circumstances of the case, we are ofthe view that there is no justification to disallow the claim ofpayment of commission to these parties. We, therefore, directto delete the same.” In our opinion, the ITAT has come to the aforesaidconclusion on the basis of sufficient evidence available on the recordwhich clearly prove that the amount of commission/service expenses wasactually paid by the assessee to those parties. The ITAT on the basis ofthe said evidence has recorded a pure finding of fact while coming to theconclusion that the assessee has clearly proved the payment of theaforesaid two amounts to the above-said parties. In our opinion, when theassessee has proved the actual payment of the aforesaid amounts as wellas receipt of the same amount by the above-said parties, then the claim putforth by the assessee should not have been disallowed merely on theground that the same was not supported by any documentary evidence.Therefore, in our view the ITAT has rightly held that the adjudicatingauthorities below were not justified in disallowing the deduction claimed ITA No. 608 of 2007 -4- by the assessee. In our view, a pure finding of fact has been recorded by the ITAT which does not require any interference in this appeal. No substantial question of law is involved in this appeal.Dismissed. (SATISH KUMAR MITTAL) JUDGE February 06, 2008vkg (RAKESH KUMAR GARG) JUDGE