Commissioner of IncomeTax v. Harsh J. Punjabi

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The Tax PublishersITA No. 749 of 2011 2012 TaxPub(DT) 2047 (Del-HC) : (2012) 047 (I) ITCL 0184 : (2012) 345 ITR 0451 INCOME TAX ACT, 1961 --Revision--Erroneous and prejudicial orderNo enquiry by AO as to why commission was debited only in profit and loss of non SEZ unit--Assessee was an exporter. He had two units, one at gurgaon and other in a special economic zone one at in Chennai AO, while passing assessment order for the year under consideration, accepted the profit earned from SEZ unit as computed and declared by assessee. He allowed the exemption under section 10A in respect of said profits of SEZ unit. Subsequently, CIT invoked the provisions of section 263 by observing that assessee had debited payment of commission in profit and loss account of non SEZ unit and no amount of commission was debited in profit and loss account of SEZ unit. He noticed that the agreement for payment of commission was for booking orders abroad and the export orders were executed by both SEZ and non-SEZ units ad the gods supplied by non-SEZ and SEZ units were purchased by the common parties abroad. Therefore, he concluded that assessment order was erroneous and prejudicial to te interest of revenue as the total claim of commission was made only from non SEZ unit. Accordingly, he directed AO to examine the aspect of payment of commission. Held: The Commissioner had noted that the AO did not conduct any enquiry or verification whether the aforesaid commission of Rs. 3.33 crores was attributable to the orders placed and exports made by the Chennai unit. The AO did not examine and go into the facet that the assessee had debited commission in the profit and loss account of the non SEZ unit alone and not debited any part or portion towards and for exports made by the SEZ unit. Income of the Gurgaon unit is taxable and if the entire commission expense is attributed and debited in the profit and loss account of the Gurgaon unit, it would reduces the profits earned from the said unit. Commissioner had rightly invoked the provisions of section 263 by. In view of above facts, observe that the AO should have made enquiry and verified whether the aforesaid commission payment was attributable to the orders procured and supplies made by the SZ unit. Income Tax Act, 1961 Section 263 IN THE DELHI HIGH COURT SANJIV KHANNA & R. V. EASWAR JJ. CIT v. Harsh J. Punjabi ITA No. 749 of 2011 20 January 2012 Appellant by : Sanjeev Rajpal, Advocate, SUBSCRIBE FOR FULL CONTENT

The Tax PublishersITA No. 749 of 2011
2012 TaxPub(DT) 2047 (Del-HC) : (2012) 047 (I) ITCL 0184 : (2012) 345 ITR 0451

INCOME TAX ACT, 1961

--Revision--Erroneous and prejudicial orderNo enquiry by AO as to why commission was debited only in profit and loss of non SEZ unit--Assessee was an exporter. He had two units, one at gurgaon and other in a special economic zone one at in Chennai AO, while passing assessment order for the year under consideration, accepted the profit earned from SEZ unit as computed and declared by assessee. He allowed the exemption under section 10A in respect of said profits of SEZ unit. Subsequently, CIT invoked the provisions of section 263 by observing that assessee had debited payment of commission in profit and loss account of non SEZ unit and no amount of commission was debited in profit and loss account of SEZ unit. He noticed that the agreement for payment of commission was for booking orders abroad and the export orders were executed by both SEZ and non-SEZ units ad the gods supplied by non-SEZ and SEZ units were purchased by the common parties abroad. Therefore, he concluded that assessment order was erroneous and prejudicial to te interest of revenue as the total claim of commission was made only from non SEZ unit. Accordingly, he directed AO to examine the aspect of payment of commission. Held: The Commissioner had noted that the AO did not conduct any enquiry or verification whether the aforesaid commission of Rs. 3.33 crores was attributable to the orders placed and exports made by the Chennai unit. The AO did not examine and go into the facet that the assessee had debited commission in the profit and loss account of the non SEZ unit alone and not debited any part or portion towards and for exports made by the SEZ unit. Income of the Gurgaon unit is taxable and if the entire commission expense is attributed and debited in the profit and loss account of the Gurgaon unit, it would reduces the profits earned from the said unit. Commissioner had rightly invoked the provisions of section 263 by. In view of above facts, observe that the AO should have made enquiry and verified whether the aforesaid commission payment was attributable to the orders procured and supplies made by the SZ unit.

Income Tax Act, 1961 Section 263

IN THE DELHI HIGH COURT

SANJIV KHANNA & R. V. EASWAR JJ.

CIT v. Harsh J. Punjabi

ITA No. 749 of 2011

20 January 2012

Appellant by : Sanjeev Rajpal, Advocate,