Shri Kailash Chand Agarwal, Kanpur vs Department Of Income Tax

Dy.C.I.T.-II, Vs Shri Kailash Chand Agarwal, Kanpur 51/27, Nayaganj, Kanpur. PAN:ACFPA9424M (Appellant) (Respondent)

Appellant by Shri O. N. Pathak, D. R. Respondent by Shri Rakesh Garg, Advocate Date of hearing 11/03/2015 Date of pronouncement 16/04/2015

ORDER

PER A. K. GARODIA, A.M.

This is Revenue's appeal directed against the order passed by learned CIT(A)-II, Kanpur dated 07/06/2013 for the assessment year 2010-11.

2. The grounds raised by the Revenue are as under:

"1. The Ld. Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in restricting the addition of Rs.18.90.800/- made by the Assessing Officer on account of "commission paid in cash" to Rs.1.89.080/- ignoring the fact that the assessee was not able to provide the addresses of the parties to whom commission was paid and the assessee was also not able to provide any concrete evidence whether the commission was paid on cash sales or purchases.

2. That the Ld. Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in restricting the addition of Rs.18.90.800/- made by the Assessing Officer on account of "commission paid in cash" to Rs.1,89,080/- ignoring the fact that each assessment year is a distinct 2

and unique assessment year and assessment done in one assessment year does not apply to another assessment year.

3. That the order of the Ld. CIT(A)-II, Kanpur dated 07.06 2013 needs to be quashed and the order passed by the Assessing Officer dated 27.02.2013 be restored."

3. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A).

4. We have considered the rival submissions. We find that it is noted by the Assessing Officer in the assessment order that the assessee has paid commission of Rs.27,91,200/- out of which commission of Rs.18,90,800/- was paid in cash. The entire amount of cash payment of commission was disallowed by the Assessing Officer by alleging that this commission payment in cash is bogus. When the assessee carried the matter in appeal before the CIT(A), the CIT(A) has upheld the disallowance to the extent of 10% of the total commission paid and deleted the balance disallowance. The relevant paras of the order of CIT(A) being para no. 5 & 6 are reproduced below for the sake of ready reference:-

"5.1 I have considered the submissions and the arguments placed by the A.R. of the assessee and the contents of the assessment order. The A.R. has explained that the assessee's business requires the same through brokers. The product is such that the requirements are consolidated through brokers and therefore the payment of commission in such business has been normal practice. The A.R. of the assessee has explained that the commission has been paid for the last several years and placed the following :-

Asstt. Year Sales Commission Commission Paid Commission Disallowed Received (Cash) Paid (Cheq.)

2010-11 1,36,70, 280/- 43,95,186/- 18,90,800/- 8,90,400/- 18,90,800/-

2009-10 42,12,875/- 32,19,008/- 12,89,400/- NIl 1,28,910/-

2008-09 31,52,536/- 27,24,430/- 11,10,600/- NIL 1,11,106/-

2007-08 35,99,679/- 24,24,230/- 65,1,840/- NIL 65,184/-

2006-07 22,05,621/- 17,93,928/- 5,42,400/- NIL NIL 3

"6. The assessee has maintained the vouchers for payment of commission which bears the signature of recipients. He has been emphasizing that the business requires the payment of commission and without the brokers, purchase and sale cannot be effected. From the above chart, it is obvious that the turnover of the assessee has increased substantially during the year. In A.Y. 2009-10, the assessee had paid commission of Rs.12,89,400/- and out of the same only 10% was disallowed by the AO. Same is the case for A.Y. 2008-09 and 2007-08. The assessee has not preferred appeal against disallowance of 10% of the commission. Accordingly, it would meet the ends of the justice if 10% of Rs.18,90,800/- i.e. Rs.1,89,080/- is disallowed. On consideration of the business practices followed and the past practices accepted by the AO, the disallowance of commission is restricted to Rs.1,89,080/-."

4.1 From the above paras from the order of CIT(A), we find that it is stated by him that in earlier years, disallowance was made by the Assessing Officer to the extent of 10% of commission payment in cash and the assessee did not prefer any appeal against such part disallowance in earlier years. In assessment year 2009-10, the commission payment was to the extent of Rs.12.89 lac against a turnover of Rs.42.12 lac and commission receipt of Rs.32.19 lac. In the present year, the turnover is Rs.136.70 lac and commission receipt is Rs.53.59 lac and the commission payment has increased to Rs.27.91 lac out of which payment of commission in cash is to the extent of Rs.18.91 lac. Hence, it is seen that the percentage increase in payment of commission is less than the percentage increase in turnover. In the earlier three years, the Assessing Officer himself had made disallowance of 10% of payment of commission in cash. No difference in facts could be pointed out by Learned D.R. of the Revenue. We are aware that res judicata is not applicable in income tax proceedings but at the same time, it is approved by Hon'ble Apex Court also that principle of consistency has to be followed and if a particular stand has been taken by the Revenue in earlier years, the same should not be disturbed in later years unless the 4

facts are different or the stand taken earlier by the Revenue is not a possible and plausible view. In the present case, this is not the case of the Revenue that the stand taken by the Assessing Officer in earlier years by making disallowance of 10% is not a possible and plausible view. No difference in facts also could be pointed out by Learned D.R. of the Revenue and hence, as per the principles of consistency, the stand taken by Revenue in earlier years should not be disturbed in the present year in the facts of the present case. The order of CIT(A) for confirming the disallowance to the extent of 10% of commission payment is in line with the stand taken by the Assessing Officer in earlier three years. Hence, in the present year also, the direction given by CIT(A) is in line with the stand of the Revenue in earlier years. We, therefore, do not find any reason to interfere in the order of CIT(A).

5. In the result, the appeal of the Revenue stands dismissed.

(Order was pronounced in the open court on the date mentioned on the caption page)

Sd/. Sd/.

(SUNIL KUMAR YADAV) ( A. K. GARODIA ) Judicial Member Accountant Member

Dated:16/04/2015 *C.L.Singh

Copy of the order forwarded to : 1.The Appellant 2.The Respondent. 3.Concerned CIT 4.The CIT(A) 5.D.R., I.T.A.T., Lucknow Asstt. Registrar