Pawan Kumar v. Commissioner Of Income Tax, Kurukshetra

ITA No. 125 of 2012 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 125 of 2012 Date of Decision: 6.4.2016 Pawan Kumar ....Appellant. Versus Commissioner of Income Tax, Kurukshetra ...Respondent. 1.Whether the Reporters of the local papers may be allowed to see the judgment? 2.To be referred to the Reporters or not? 3.Whether the judgment should be reported in the Digest? CORAM:-HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MRS. JUSTICE RAJ RAHUL GARG. PRESENT: Mr. Pankaj Jain, Senior Advocate with Mr. Divya Suri, Advocate, Mr. Sachin Bhardwaj, Advocate and Mr. Madhur Sharma, Advocate for the appellant. Mr. Yogesh Putney, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This appeal has been filed by the assessee under Section260A of the Income Tax Act, 1961 (in short “the Act”) against the orderdated 30.11.2011 (Annexure A-13) passed by the Income Tax AppellateTribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as“the Tribunal”) in ITA No. 763/CHD/2011, for the assessment year 2007-08. The appeal was admitted by this Court vide order dated 29.4.2014for determination of the following substantial questions of law:- (i)Whether under the facts and circumstances of the case, the Tribunal order is sustainable whilemaking estimated additions, overlooking theprovisions of Section 145, and returningunreasonable findings being dehors to the'material facts' containing 'material particulars'? (ii)Whether under the facts and circumstances ofthe case, the Tribunal conclusions areunreasonable, to the 'material on record', beingeven in apposite the assessment order and CITthe case, the Tribunal conclusions areunreasonable, to the 'material on record', beingeven in apposite the assessment order and CIT (A) order? 2.The facts necessary for adjudication of the present appealas narrated therein may be noticed. The assessee is a proprietor ofSaraswati Gas Service, Pehowa and had been allotted distributorship forLPG by Hindustan Petroleum since the year 1986-87. Additionally, theassessee had been allotted distributorship for sale of Bharat SancharNigam Limited (BSNL) products, i.e. Sim Card, Recharge Coupons videagreement dated 9.9.2006 (Annexure A-1) on which 5% commissionwas paid to the assessee on sale and the assessee had to pay 4% (i.e.,80% commission of 5%) to the franchisee distributors on the sale of theproducts. The commission was not passed on in cash but was to beadjusted by reducing the value of the products. The BSNL allotteddistributorship to the assessee for Ludhiana, Samana, Mohali,Kapurthala and Nilokheri. Separate stock register for each and everyitem was being maintained and had been produced before the AssessingOfficer. All the purchase and sale bills were produced for examinationfor all the regions allotted which is discernible from the paper book of theTribunal dated 29.11.2011 (Annexure A-3). The assessee was regularly and consistently following the mercantile system of accounting andhaving resources of income being from house property, income fromtrucks and the financial statements as per audit report dated 25.8.2007(Annexure A-4). The assessee filed his return of income on 2.11.2007(Annexure A-5) declaring the total income at ` 4,74,000/-. The assesseealso submitted written pleadings dated 3.9.3009 (Annexure A-6) beforethe Assessing Officer. The Assessing Officer vide assessment orderdated 3.12.2009 (Annexure A-7) under Section 143(3) of the Actcomputed the income at ` 8,83,740/- after disallowing commission paidamounting to ` 2,00,000/- besides other disallowances. Feelingaggrieved by the order, Annexure A-7, the assessee filed an appealdated 1.1.2010 (Annexure A-8) before the Commissioner of Income Tax(Appeals) [for brevity “the CIT(A)”]. The assessee also submitted writtenpleadings dated 25.1.2011 (Annexure A-9). The CIT(A) vide order dated18.3.2011 (Annexure A-10) partly allowed the appeal. However, thedisallowance of ` 2,00,000/- on account of claim for commission paidwas maintained. Still dissatisfied, the assessee filed an appeal beforethe Tribunal on 22.7.2011 (Annexure A-11). The Tribunal vide orderdated 30.11.2011 (Annexure A-13) partly allowed the appeal reducingthe aforesaid disallowance to ` 50,000/-. Hence, the present appeal bythe assessee. 3.Learned counsel for the assessee submitted that theaddition of ` 50,000/- was unsustainable being based on 'no material'and was conjectural. addition of ` 50,000/- was unsustainable being based on 'no material'and was conjectural. 4.On the other hand, learned counsel for the revenuesupported the order passed by the Tribunal.supported the order passed by the Tribunal. 5.We have heard learned counsel for the parties. 6.The core issue that arises for consideration in this appeal isregarding the disallowance of ` 50,000/- from the commission received from the BSNL out of an amount of ` 1,57,64,756/- as commission paid. 7.The CIT(A) after perusing the material produced before himand examining certain bills noted that they do not bear the completeaddress of the retail customers/sub dealers. The addresses on the billswere incomplete and the parties could not be located in such bigtown/cities without complete addresses. The payments on the said billshad been shown to be received in cash. Accordingly, the disallowanceof commission amounting to ` 2,00,000/- was rightly made by theAssessing Officer. The relevant findings recorded by the CIT(A) readthus:- “2.06. In the comments, the AO submitted that in replyfiled on 13.5.2009, the assessee submitted thatcommission is given from 85% to 88% to sub-dealerson sub-franchise as per sale voucher attached. Onperusal of some bills filed by the assessee during theassessment proceedings, it was noted that the samedo not bear the complete address of the retailcustomers/sub dealers, for example bill no. 4877 dt.19.01.2006 is in the name of Shri Raj Kumar Samna,B. No. 5018 dated Nil is in the name of Tanisk Singla,Sirhind, B. No. 4992 dt. 21.10.2006 is in the name ofAggarwal Enterprises, Patiala etc. The AO stated thataddress given in these bills are totally incomplete andparties cannot be located in such big town/citieswithout complete address. Moreover, the payments on these bills have been shown as received in cash.In view of these discrepancies in all most all the bills,the AO submitted that disallowance of ` 2 lakh wasrightly made. 2.07. The appellant in the rejoinder stated that thesebills were given to the JCIT during assessment as aproof that the sale was vouched. Sale vouchers wereissued in each and every transaction, which isaccepted by the AO. on these bills have been shown as received in cash.In view of these discrepancies in all most all the bills,the AO submitted that disallowance of ` 2 lakh wasrightly made. 2.07. The appellant in the rejoinder stated that thesebills were given to the JCIT during assessment as aproof that the sale was vouched. Sale vouchers wereissued in each and every transaction, which isaccepted by the AO. 2.08. In view of the facts discussed above, it is notedthat the appellant has not been able to rebutt thefindings of the AO made in the assessment order formaking this adhoc disallowance. No interference is,therefore, called for in the order of the AO in thisregard and the adhoc disallowance made by him is, hereby, confirmed.” 8.On further appeal, the Tribunal taking into account thetotality of facts and circumstances of the case while affirming the findingsof the CIT(A) had reduced the addition from ` 2,00,000/- to ` 50,000/-.The Tribunal had recorded as under:- “6.From the perusal of the evidence placed by theassessee in the paper book filed, we find that theassessee had purchased sim cards/recharge couponfrom the BSNL. The copies of the bills of BSNL areenclosed at pages 257 to 391 of the Paper Book. Theassessee has further enclosed the bills issued by itdate-wise at pages 392 to 568 of the Paper Book. The said sales are affected by the assessee in cashand the net amount of the recharge coupon/sim cardshave been charged by the assessee. The assesseehas not paid commission in cash but has reduced thesale value of the sim-card/invoice after deducting thecommission. The assessee claims to have maintainedstock register. 7.We find merit in the claim of the assessee. Inthe entirety of the facts and circumstances of thepresent case before us, in order to pluck any leakageof the Revenue, we restrict the disallowance to` 50,000/-. Ground No.1 raised by the assessee is,thus, partly allowed.” 9.The examples were taken of certain bills bearing No. 4877dated 19.1.2006 in the name of Shri Raj Kumar Samna, No. 5018 dated'nil' in the name of Tanisk Singla, Sirhind, bill No. 4992 dated 21.10.2006in the name of Aggarwal Enterprises, Patiala etc. where completeaddresses of the retail customer/sub dealers had not been mentioned sothat the same could be verified and it was also recorded that in view ofthe incomplete particulars, the parties were not locatable in such bigcities. It was in the totality of facts and circumstances that the addition of` 50,000/- was sustained by the Tribunal. The view taken by theTribunal in the given facts and circumstances is plausible and alsoreasonable in upholding the addition of ` 50,000/- only. 10.The finding recorded by the Tribunal, which has not beendemonstrated to be erroneous or perverse in any manner, therefore, wedo not find any substance in the appeal warranting interference by this ITA No. 125 of 2012 -7- Court. The substantial questions of law are answered accordingly.Finding no merit in this appeal, the same is hereby dismissed. (AJAY KUMAR MITTAL)JUDGE April 6, 2016gbs (RAJ RAHUL GARG)JUDGE