M/S. B Fouress (P) Limited vs The Deputy Commissioner
2021 Latest Caselaw 694 Kant

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 IN THE HIGH COURT OF KARNATAKA AT BENGALURU

       DATED THIS THE 12TH DAY OF JANUARY 2021

                         PRESENT

        THE HON'BLE MR. JUSTICE ALOK ARADHE

                               AND

  THE HON'BLE MR. JUSTICE NATARAJ RANGASWAMY

                    I.T.A. NO.203/2016
BETWEEN:

M/S. B FOURESS (P) LIMITED
PLOT NO.7, PB NO.11
KIADB INDUSTRIAL AREA
HOSAKOTE - 562 114
REPRESENTED BY ITS
MANAGING DIRECTOR
MR. SAMEER SHETTY
AGED ABOUT 44 YEARS
SON OF LATE MR. SADANAND A. SHETTY.
                                             ... APPELLANT
(BY MISS. JINITA CHATTERJEE, ADV., FOR
     MR. S. PARTHASARATHI, ADV.,)

AND:

THE DEPUTY COMMISSIONER OF
INCOME-TAX, CIRCLE 11(2)
5TH FLOOR, R.P.BHAVAN
NRUPATHUNGA ROAD
BANGALORE - 560 001.
                                           ... RESPONDENT
(BY MR. K.V. ARAVIND, ADV.,)
                             ---
      THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX
ACT 1961, ARISING OUT OF ORDER DATED 30.12.2015 PASSED
IN ITA NOS.847 & 848/BANG/2014 FOR THE ASSESSMENT YEAR
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2009-10 AND 2010-11 AND ITA NO.846(BNG)/2014 FOR THE
ASSESSMENT YEAR 2010-11, PRAYING TO:
      (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW
STATED ABOVE.
      (ii) ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE
ITAT DATED 30.12.2015 BEARING ITA NOS.847 & 848 (BNG)/2014
FOR THE ASSESSMENT YEARS 2009-10 AND 2010-11 AND ITA
NO.846 (BANG)/ 2014 FOR THE ASSESSMENT YEAR 2010-11 AND
ETC.

     THIS I.T.A. COMING ON FOR HEARING,        THIS   DAY,
ALOK ARADHE J., DELIVERED THE FOLLOWING:

                       JUDGMENT

This appeal under Section 260A of the Income Tax

Act, 1961 (hereinafter referred to as the Act for short)

has been preferred by the assessee. The subject matter

of the appeal pertains to the Assessment years 2009-10

and 2010-11. The appeal was admitted by a bench of

this Court vide order dated 25.01.2017 on the following

substantial question of law:

Whether the tribunal was justified in upholding the disallowance under Section 37 of IT Act of commission payment as made by the Assessing Officer which was only on the basis of the order for the preceding year without appreciation of facts and evidence placed before the Assessing Officer for the

relevant years and such an unspeaking order was sustainable and the tribunal was right in restoring the disallowance as made by the Assessing Officer?

2. Facts leading to filing of this appeal briefly

stated are that the assessee is a company incorporated

under the provisions of the Companies Act, 1956 and is

engaged in the manufacture and sale of Hydro Turbines.

The assessee filed its return of income for the

Assessment Year 2009-10 on 26.09.2009 declaring total

income of Rs.18,44,87,730/- which was revised on

22.03.2011. Thereafter, the assessment was concluded

under Section 143(3) of the Act on 14.12.2011 by the

Assessing Officer after disallowing commission of

Rs.2,93,08,446/- and total income of the assessee was

assessed at Rs.21,37,96,180/-. Similarly for the

Assessment Year 2010-11, commission to the extent of

Rs.10,15,95,341/- was disallowed by an order dated

31.01.2013 under Section 143(3) of the Act and total

income of Rs.22,47,55,162/ was determined by the

Assessing Officer vide order dated 31.03.2013.

3. The assessee thereupon filed appeals before

the Commissioner of Income Tax (Appeals) against the

orders of assessment inter alia on the ground that the

Assessing Officer did not independently examine the

details furnished by the assessee to justify the

disallowance of commission payment and simply

followed the finding of the Assessing Officer for the

Assessment Year 2002-03. It was also brought to the

notice of Commissioner of Income Tax (Appeals) that

with regard to the assessment for Assessment Year

2006-07, though the Commissioner of Income Tax

(Appeals) confirmed the addition, on an appeal being

preferred to the tribunal, the tribunal remitted the

matter to the file of Assessing Officer for independent

enquiry and thereafter to pass separate order. The

assessee further furnished the details with regard to

justification for the claim of commission payment for the

relevant years. The Commissioner of Income Tax

(Appeals) by an order dated 27.02.2014 deleted the

addition pertaining to Assessment Year 2009-10.

However, the addition pertaining to Assessment Year

2010-11 was sustained. The assessee thereupon filed an

appeal before the Income Tax Appellate Tribunal

(hereinafter referred to as 'the tribunal' for short). The

tribunal by an order dated 30.12.2015 dismissed the

appeal preferred by the assessee. In the aforesaid

factual background, the assessee has approached this

court.

4. Learned counsel for the assessee submitted

that the assessee had furnished all the details, which

were furnished before the Commissioner of Income Tax

(Appeals) viz., copies of agency agreement with

commission agents entered into on different dates,

copies of invoice raised by commission agents, copies of

bank statements showing amount remitted to the said

commission agents along with payment vouchers as well

as copies of TDS certificates in Form No.16A. It is also

pointed out that it was brought to the notice of the

tribunal that for Assessment Year 2006-07, the tribunal

had restored the case to the file of the Assessing Officer

who on the basis of appreciation of facts and evidence

on record accepted the claim and allowed the deduction

and copy of the order passed by the tribunal for the

Assessment Year 2006-07 was also placed on record. It

was also pointed out that assessee had provided

adequate material with regard to justification of the

claim. However, the tribunal did not take note of the

material placed by the assessee and held that the

assessee had not chosen to file any evidence in support

of services rendered by the sales agencies either before

the Commissioner of Income Tax (Appeals) or before the

tribunal. It is also pointed out that the aforesaid finding

is perverse and therefore, the matter be remitted for

decision afresh to the tribunal. On the other hand,

learned counsel for the revenue has invited the attention

of this court to para 10 of the order passed by the

tribunal and has submitted that the order passed by the

tribunal is just and proper and does not call for any

interference.

5. We have considered the submissions made

by learned counsel for the parties and have perused the

record. From perusal of para 4.6 of the order passed by

the Commissioner of Income Tax (Appeals), it is evident

that the material was produced by the assessee which

has not been considered by the tribunal. It is also

noteworthy that the tribunal has not considered its

order passed in respect of Assessment Year 2006-07 by

which it had restored the case back to the file of the

Assessing Officer who after appreciation of material on

record had allowed the claim of the assessee for

deduction. However, the tribunal has upheld the

disallowance under Section 37 of the Act merely on the

basis of order passed in respect of preceding year. The

order passed by the tribunal is cryptic and suffers from

the vice of non application of mind.

In view of preceding analysis, the substantial

question of law is answered in favour of the assessee

and against the revenue. In the result, the order dated

30.12.2015 insofar as it pertains to Assessment Years

2009-10 and 2010-11 is hereby quashed and the matter

is remitted to the tribunal for decision afresh in

accordance with law.

Accordingly, the appeal is disposed of.

Sd/-

JUDGE

Sd/-

JUDGE ss