Commissioner of Income Tax vs Mohd. Ishaq Mohd. Gulam

Arun Mishra, J.—These two appeals involve common question for consideration. They are being dealt with together.

M.A. No. 40 of 2004 has been filed by the Revenue for relating asst. yr. 1997-98. M.A. No. 11 of 2004 pertains to asst. yr. 1998-99.

Briefly noted, the facts indicate that assessee, M/s Mohd. Ishaq Mohd, Gulam derives income from manufacture and sale of Bidis, filed its return for the asst. yr. 1997-98 on 31st Oct., 1997, declaring total income of Rs. 1,12,30,640. Assessment was completed vide order (Annex. A) dt. 22nd March, 2000 u/s 143(3) of the IT Act, 1961. The AO determined total income at Rs. 1,13,15,834. The CIT, in the capacity of revisional authority found that certain credits were shown which were accepted by the AO on the strength of confirmation. The assessee filed confirmation with GIR/PAN. The revisional authority has passed an order (Annex. B) on 5th Nov., 2001 that source of deposit was not examined with respect to the credit made by 6 persons. The 7 per cent commission was directed to be allowed, instead of 10 per cent. The GIT remitted the matter for further inquiry to the AO.

The order passed by the CIT was assailed before the Tribunal. The appeal has been decided by order (Annex. C) dt. 23rd June, 2003. The Tribunal has in various decisions, allowed 10 per cent commission in similar cases. The creditors identity, capacity and source have been explained to the satisfaction of the AO. The order passed by CIT has been set aside, hence the present appeal has been filed.

Shri Rohit Arya, learned senior counsel appearing with Shri Ajit Ade, submitted that in the facts and circumstances of the case, the order passed by the revisional authority was proper. The Tribunal has erred in law in setting aside the order for both the years, i.e., 1997-98 and 1998-99, as per common order (Annex. C). He has submitted that source of the creditor was required to be verified and the AO rightly directed to allow 7 per cent commission to Gulam Rasul. Thus, the Tribunal has erred in law in setting aside the order passed by the GIT, in both the cases.

With respect to the identity and source of creditors, order passed by the AO indicate that due and proper enquiry was made. New loans in the name of 12 parties were noticed as apparent from the assessment order (Annex. A) passed by the Jt. GIT (Asst.), Special Range, Jabalpur. The assessee was asked to explain the genuineness of creditors, in compliance to direction, confirmation of loan have been furnished, duly signed and giving the permanent account number of the creditors. All the creditors are assessed to Katni. ITO was requested to verify the loan advanced by the persons. In compliance to the said letter, ITO, Katni has sent the reply on 16th March, 2000 stating that he could lay hands on 6 files which showed that the loan was advanced by the above parties. The assessee has filed the photocopies of the acknowledgement and statement of income of some of the persons. Hence, the AO has opined that the loan has been explained properly and has accepted them to be genuine.

With respect to the asst. yr. 1998-99, names of 10 parties were noticed. Then the assessee was asked to explain the genuineness of the loan. In compliance to this the confirmation for such loan have been furnished duly signed and giving permanent account number of the creditors who are assessed at Katni. Loans have been accepted as genuine. The revisional authority has observed that immediate source of deposit was not at all verified and the credits have been accepted on the strength of confirmation letter filed by the assessee. We find that there was material on record before AO to accept creditors as genuine.

The Tribunal has dealt with the matter in paras 14 and 15 of the order. The Tribunal has observed that the AO was quite justified in passing the orders dt. 22nd March, 2000, 26th March, 2001, which were passed after thorough inquiry. The AO has allowed cash credit after verification of record as to capacity, genuineness of the transactions and identity of creditors. Roving enquiry cannot be permitted and in the facts it was unjustified.

The question of creditors as well as commission has been dealt with in paras 14 and 15 of the order, passed by the Tribunal. The relevant paragraphs are quoted below :

"14. We have heard the rival submission and perused the citations and paper book. We find there is sufficient force and effectiveness in the arguments submitted by counsel of the assessee. The assessee has paid 10 per cent commission in compliance to the order of learned Bench for the asst. yr. 1989-90 and the same was paid during many previous years as per the agreement signed by assessee and sole selling agent, i.e., M/s Gulam Rasool & Co. The payment of commission to sister-concern does not change the nature of expenditure incurred in commercial expediency. Therefore, order of assessments as regards to payment of commission cannot be said as erroneous and prejudicial to the interest of Revenue [ Bank of Baroda Vs. H.C. Shrivatsava and Another, K.N. Agarwal v. CIT, (1991) 189 ITR 769 ]. The decisions of Benches are binding on Revenue authorities [CIT v. Murti Devi Pradeep Kumar. The Revenue cannot refuse to follow the order of jurisdictional Bench of this Tribunal [ Agrawal Warehousing and Leasing Ltd. (now Admanum Finance Ltd.) Vs. Commissioner of Income Tax, ]. The following decisions, i.e., CIT v. Dalmia Cement (Bharat) Ltd., Commissioner of Income Tax Vs. Klas Engineering (P.) Ltd., ; Commissioner of Income Tax Vs. Modi Industries Ltd., ; Commissioner of Wealth Tax Vs. S. Muthukumaraswamy Udayar (Commissioner of Income Tax v. S. Subramania Udayar), 222 ITR 20 CIT v. Dalmia Cement (Bharat) Ltd. Commissioner of Income Tax Vs. Sutlej Cotton Mills Ltd., ; Commissioner of Income Tax Vs. Hindusthan Motors Ltd., ; Lachminarayan Madan Lal Vs. Commissioner of Income Tax, West Bengal, fully assist the claim of the assessee of allowing expenditure on the principles of commercial exigency. The reasonableness is to be judged by assessee as the best Judge. The decisions, i.e. Commissioner of Income Tax Vs. Dalmia Cement (B.) Ltd., ; Commissioner of Income Tax Vs. Klas Engineering (P.) Ltd., ; Madhav Prasad Jatia Vs. Commissioner of Income Tax, U.P. Lucknow, and Commissioner of Income Tax Vs. Sinnar Bidi Udyog Ltd., favour of the assessee. Apart from that, the assessee has proved the cash credits appearing in the books of accounts of the assessee on the basis of submitting confirmation and affidavits along with PAN numbers. The decision, i.e., Commissioner of Income Tax, Orissa Vs. Orissa Corporation (P) Ltd., ; Additional Commissioner of Income Tax Vs. Hanuman Agarwal, ; Deputy Commissioner of Income Tax Vs. Rohini Builders, ; Commissioner of Income Tax Vs. Shanti Swarup, assist the claim of the assessee since the assessee has discharged the onus of submitting tax index numbers of the creditors and submitted that the capacity, identity and the source is fully explained to the satisfaction of AO, therefore, no addition is called for and therefore, the AO was fully justified for treating the cash credits not as income whereas it is not correct to say that the assessee has not proved capacity, genuineness of the credit and identity of the creditors where further enquiry is necessary as noticed in the order of CIT-II While passing the order u/s 263.

Therefore, we conclude that the learned CIT, while invoking the powers u/s 263 for revising the orders passed by AO u/s 143(3) of the Act simply pointing out that the AO has not made further enquiry in regards to cash credits and payment was made in excess to M/s Gulam Rasool whereas he should have paid 7 per cent commission is not legally justifiable. The AO was quite justified while passing the assessment orders u/s 143(3) after thorough enquiry. The conclusion, arrived at by CIT are not plausible and acceptable on the merits because the AO has allowed 10 per cent commission in compliance to the order of learned Bench of this Tribunal. The decision Russell Properties Pvt. Ltd. Vs. A. Chowdhury, Addl. Commissioner of Income Tax and Others, and Bank of Baroda v. H.C. Shrivastava & Ors. (supra) opines that the order of Hon''ble Tribunal are binding and order passed by AO in compliance to the order of the Bench cannot be said to be erroneous and prejudicial to the interest of Revenue. The AO has allowed the cash credit after verification in regards to capacity, genuineness of the transaction and identity, therefore, the order passed by learned CIT deserves to be set aside while relying on the decisions in Commissioner of Income Tax Vs. Arvind Jewellers, and Malabar Industrial Co. Ltd. v. CIT, (2000) 243 ITR 83 because roving enquiry cannot be permitted and there should be a finality of assessment in the interest of justice is must. There is no different conclusion arrived at by learned CIT while passing the order u/s 263 of the Act. The findings of CIT are not definite one, except set aside the order passed by AO for further enquiry and investigation. For further investigation and enquiry no assessment order becomes erroneous and prejudicial to the interest of Revenue. The CIT while passing the order u/s 263 acting judicially, therefore, such roving enquiry to avoid finality of assessment is not justifiable. The order of learned CIT u/s 263 deserves to be quashed on the ground that AO has allowed 10 per cent commission to sole selling agent while following the decision of jurisdictional Bench of the Tribunal and allowed cash credit after having sufficient enquiry and after finding the cash credits were genuine."

Coming to the submission raised by Shri Rohit Arya, learned senior counsel appearing for the Revenue that revisional authority was justified in allowing commission at the rate of 7 per cent only, as in other similar decisions, 7 per cent commission has been allowed. We find that in the facts and circumstances of the case, the order passed by the Tribunal cannot be said to be suffering with any illegality. The submission that the commission at the rate allowed is unjustified as rate for the year 1989-90 is disputed cannot be accepted as several years have lapsed since the Tribunal has considered the question in extensive detail. We find no ground to make interference into allowing the commission @ 10 per cent as it is also a question of fact, not a substantial question of law. When in other similar cases Tribunal has allowed 10 per cent commission, we find that Tribunal is justified in treating assessee on similar footing.

The finding of genuineness of the creditors is based on sufficient evidence, which has been accepted by the AO and by the Tribunal. Question raised is of sufficiency of evidence. We find no substantial question of law arises in the appeal.

Resultantly, we find both the appeals to be meritless. The appeals are dismissed. .