COMMISSIONER OF INCOME TAX ROHTAK V. KAMLESH

ITA/815/2010

AI Insights

The case involves 17 appeals by the Commissioner of Income Tax, Rohtak against various respondents, challenging the Income Tax Appellate Tribunal's decision which favored the assessees. The core issue was the assessment of income from receipts allegedly linked to PACL India Limited, where the assessees argued that they merely lent their names and did not engage in any substantive contract work. The Tribunal had found that only the profit from these receipts, assessed at 8%, should be taxable, not the entire receipts. The High Court of Punjab and Haryana dismissed the appeals, agreeing with the Tribunal's interpretation and application of Section 44-AD of the Income Tax Act, 1961.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 718683 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 05-02-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: KULVIR NARWAL
• Assessee Lawyers: INDERPREET SINGH
• Keywords: Assessment Year 2006-07; Income from business or profession; Income Tax; Protective assessment; Substantive assessment
• Section: 44 AD

Judgement Text

"ITA No. 815 of 2010 (O&M) and other connected matters -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: February 05, 2013 1. ITA No. 815 of 2010 (O&M) Commissioner of Income Tax, Rohtak …Appellant Versus Smt. Kamlesh …Respondent 2. ITA No. 816 of 2010(O&M) Commissioner of Income Tax, Rohtak …Appellant Versus Sh. Lakhmi Chand …Respondent 3. ITA No. 817 of 2010(O&M) Commissioner of Income Tax, Rohtak …Appellant Versus Sh. Vikram …Respondent 4. ITA No. 39 of 2011(O&M) Commissioner of Income Tax, Rohtak …Appellant Versus Sh. Baldev Raj …Respondent 5. ITA No. 40 of 2011(O&M) Commissioner of Income Tax, Rohtak …Appellant Versus Surinder Kapoor …Respondent 6. ITA No. 41 of 2011(O&M) Commissioner of Income Tax, Rohtak …Appellant Versus Sanjay Kumar …Respondent 7. ITA No. 42 of 2011(O&M) Commissioner of Income Tax, Rohtak …Appellant Versus Bhushan Kumar …Respondent ITA No. 815 of 2010 (O&M) and other connected matters -2- 8. ITA No. 43 of 2011(O&M) Commissioner of Income Tax, Rohtak …Appellant Versus Vipin Sharma …Respondent 9. ITA No. 45 of 2011(O&M) Commissioner of Income Tax, Rohtak …Appellant Versus Meenu Arora …Respondent 10. ITA No. 46 of 2011(O&M) Commissioner of Income Tax, Rohtak …Appellant Versus Uma …Respondent 11. ITA No. 47 of 2011(O&M) Commissioner of Income Tax, Rohtak …Appellant Versus Sudesh Rani …Respondent 12. ITA No. 48 of 2011(O&M) Commissioner of Income Tax, Rohtak …Appellant Versus Som Nath …Respondent 13. ITA No. 150 of 2011(O&M) Commissioner of Income Tax …Appellant Versus Azad Singh …Respondent 14. ITA No. 157 of 2011(O&M) Commissioner of Income Tax, Rohtak …Appellant Versus Pooja …Respondent ITA No. 815 of 2010 (O&M) and other connected matters -3- 15. ITA No. 158 of 2011(O&M) Commissioner of Income Tax, Rohtak …Appellant Versus Rachna Sharma …Respondent 16. ITA No. 159 of 2011(O&M) Commissioner of Income Tax, Rohtak …Appellant Versus Nitin Sharma …Respondent 17. ITA No. 163 of 2011(O&M) Commissioner of Income Tax, Rohtak …Appellant Versus Rama Sharma …Respondent CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON’BLE MS. JUSTICE RITU BAHRI Present: Mr. Inderpreet Singh, Advocate for the appellant. Mr. Kulvir Narwal, Advocate for the respondent. 1 To be referred to the Reporters or not? 2 Whether the Judgment should be reported in the Digest HEMANT GUPTA, J. (Oral) This order shall dispose of afore-mentioned 17 appeals arising out of order dated 31.03.2010 passed by the Income Tax Appellate Tribunal, Delhi Bench 'D' New Delhi (for short 'the Tribunal') in respect of the assessment year 2006-07. The Revenue has claimed the following substantial questions of law: “1. Whether the Ld. ITAT has erred in deleting additions made in the hands of the assessee on ITA No. 815 of 2010 (O&M) and other connected matters -4- the protective basis, while substantive additions made in the hands of M/s PACL India Ltd., New Delhi in the assessment year 2006-07 are still pending at appellate stage. 2. Whether on the facts and circumstances of the case and in law, the ld. ITAT was right in giving a finding that the profit of the assessee should be restricted to 8% of the receipts from M/s PACL India Ltd., New Delhi, whereas the income received by the assessee is not related to contract receipts and the entire receipts are liable to be taxed.” The assessees in the present cases, had filed return of income under the head 'Income from business or profession' after applying the provisions of Section 44-AD of the Income Tax Act, 1961 (for short 'the Act'). However, during the course of assessment proceedings, it was found that the assessees have not done any contract work of PACL India Limited. Since no work has been done by the assessees, therefore, no expense can be allowed. Thus, the receipts of the assessees from PACL India Limited were treated as income of the assessees under the head 'Income from business or profession' on protective basis. Such order passed by the Assessing Officer was challenged before the Commissioner of Income Tax (Appeals), Rohtak. Commissioner of Income Tax (Appeals) returned a finding that the amounts of receipts appearing in the bank accounts, are not from the contract business. The assessees have shown net profit @ 8% of the receipts. Therefore, the income deserves to be assessed at 8% of the receipts because the assessees must not have allowed their name to be used without any consideration. It was held that such income to be assessed ITA No. 815 of 2010 (O&M) and other connected matters -5- as income from other sources and credit of tax deduction source be given. In further appeal by the assessees before the Tribunal, the Tribunal returned a finding that if the Assessing Officer was of the view that no work has been done by any of the contractor, the amount received itself cannot be considered to be income of the assessees but only the profit from such receipts can be brought to tax. The assessees herein being found to be name lenders could have charged only the commission for lending the name. Therefore, the income of the present assessees are only to the extent of receiving commission. Since all these persons have offered 8% of their income, no further amount is taxable. Learned counsel for the revenue has vehemently argued that the substantive assessment of PACL India Limited is still pending before the Tribunal, therefore, protective assessment in the hands of the assessees should not have been finalized. Having heard learned counsel for the parties, we do not find that any substantial question of law arises for consideration. On account of the finding recorded by the Tribunal, the amount disclosed by the assessees as their income has been assessed to tax as income in terms of Section 44-AD of the Act. If in the proceedings against PACL India Limited, a finding is recorded that the transactions were not genuine, then the same would be liable to be added back to the income of PACL India Limited but if finding is recorded that the transaction is genuine, the order of assessment passed by the Tribunal would require no interference so far as the assessees in the present appeal are concerned. The finalization of the assessment ITA No. 815 of 2010 (O&M) and other connected matters -6- proceedings against the assessees has, thus, no effect in respect of the assessment of PACL India Ltd. In view of the above, we do not find that any substantial question of law arises for consideration by this Court in the present appeals. Consequently, the appeals are dismissed. (HEMANT GUPTA) JUDGE (RITU BAHRI) JUDGE 05.02.2013 Atul/Vimal "