ACIT, New Delhi V. Sh. Habib Ahmed, New Delhi

ITA 1007/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97618 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 19-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 29-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL
• Keywords: Business income; Additional evidence; Wrong claim

Judgement Text

1 ITA NO.1007/DEL/12 & ITA NO.3748/DEL/13 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SMT SUCHITRA KAMBLE , JUDICIAL MEMBER I.T.A .NO.- 1007/DEL/2012 (ASSESSMENT YEA R-2008-09) ACIT CIRCLE-32 (1), ROOM NO. 376A, C.R. BUILDING, I.P. ESTATE NEW DELHI (APPELLANT) VS HABIB AHMED M-3, SOUTH EXTENSION PART-II NEW DELHI ABAPA7773K (RESPONDENT) I.T.A .NO.- 3748/DEL/2013 (ASSESSMENT YEA R-2009-10) DCIT CIRCLE 32(1), NEW DELHI (APPELLANT) VS HABIB AHMED M-3, SOUTH EXTENSION-II NEW DELHI ABAPA7773K (RESPONDENT) APPELLANT BY MS ANIMA BARNWAL, SR. DR. RESPONDENT BY SH. RAJEEV SAXENA, ADV. MS. SUMANGLA SAXENA, ADV. ORDER PER SUCHITRA KAMBLE, JM ITA NO. 1007/DEL/2012 THIS APPEAL IS FILED BY THE REVENUE AGAINST ORDER D ATED 15/12/2011 PASSED BY LD. CIT(A)S XXVI FOR THE A.Y 2008-09. DATE OF HEARING 19.10.2015 DATE OF PRONOUNCEMENT 23.10.2015 2 ITA NO.1007/DEL/12 & ITA NO.3748/DEL/13 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. WHETHER LD. CIT(A) WAS JUSTIFIED IN THE DELETIN G ADDITION OF RS.1,600,22/- ON ACCOUNT OF UNDISCLOSED PROFITS REC EIVED FROM VARIOUS OUTLETS WHEN AGREEMENT SPEAKS OF THE SHARIN G OF THE GROSS RECEIPTS IN THE RATIO OF 65:35 AND NOT THAT OF THE NET PROFIT FROM VARIOUS OUTLETS. 2. WHETHER LD. CIT(A) WAS JUSTIFIED IN THE DELETING ADDITION OF RS. 254369/- ON A/C OF EXCESS CLAIM OF RENT WHEN DETAIL S FILED BEFORE THE LD. CIT(A) WERE NOT AVAILABLE BEFORE THE A.O FOR EX AMINATION AND THE LD. CIT(A) DELETED THE ADDITION AFTER ADMITTING ADD ITIONAL EVIDENCES IN VIOLATION OF RULE 46A. 3. WHETHER LD. CIT(A) WAS JUSTIFIED IN THE DELETING ADDITION OF RS.397930/-ON A/C OF BUSINESS PROMOTION EXPENSES WH EN NO BILLS/VOUCHER WERE FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND LD. CIT(A) DELETED THE ADDITION AFTER ADMITTING ADDITIONAL EVIDENCES IN VIOLATION OF RULE 46A. 4. WHETHER LD. CIT(A) WAS JUSTIFIED IN DELETING ADD ITION OF RS.235320/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF REPAIR S AND MAINTENANCE WHEN NO BILLS/VOUCHER WERE FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND LD. CIT(A) DELETE D THE ADDITION AFTER ADMITTING ADDITIONAL EVIDENCES IN VIOLATION O F RULE 46A. 3. THE ASSESSEE IS A PROPRIETOR OF BUSINESS CONCERN S NAMED AS M/S HABIBS & M/S HABIB & SONS. M/S HABIBS IS ENGAGED IN RUNNIN G SALOONS IN VARIOUS PARTS OF DELHI AND M/S HABIB & SONS IS ENGAGED IN R UNNING THE TRAINING ACADEMY. THE ASSESSEE FILED HIS RETURN OF INCOME F OR THE A.Y 2008-09 ON 30 TH SEPTEMBER 2008 DISCLOSING A TOTAL INCOME OF RS.5,80 ,250/-. 4. AS RELATES TO GROUND NO.1, THE ASSESSEE HAS CLAI MED COMMISSION EXPENSES OF RS.18,69,981/- IN THE PROFIT AND LOSS A CCOUNT. IN RESPONSE TO THE NOTICE, THE ASSESSEE SUBMITTED THAT THE COMMISSION WAS PAID TO VARIOUS PARTIES WITH WHOM THE ASSESSEE HAS OPENED DIFFERENT PARTNER SHIP ENTITIES IN AND OUT OF DELHI. AS AN EVIDENCE TO THE COMMISSION PAID THE AS SESSEE HAS SUBMITTED 3 ITA NO.1007/DEL/12 & ITA NO.3748/DEL/13 MANAGEMENT AGREEMENT/COLLABORATION AGREEMENT WITH V ARIOUS PARTIES TO WHOM THE COMMISSION HAS BEEN PAID. THE ASSESSEE HAD AN A RRANGEMENT OF THE NET PROFIT SHARING IN THE RATIO OF 65:35 ON THE AMOUNT AFTER REDUCING, THE OPERATING EXPENSES FROM THE GROSS RECEIPTS WITH VARIOUS PARTI ES. THE ASSESSEE CLAIMED 35% OF THE NET PROFIT SHARING PAID TO THE VARIOUS P ARTIES AS COMMISSION EXPENSES. THE ASSESSING OFFICER HAS ADDED RS.19,60 ,022/- AS BUSINESS INCOME ON ACCOUNT OF NET PROFITS RECEIVED FROM OUTLETS AT ROHINI (DELHI), DEHRADUN, NOIDA AND FARIDABAD. THE LD. CIT(A) DELETED THE SA ID ADDITION OF RS. 19,60,022/-. 5. THE DR SUBMITTED THAT THE AGREEMENTS ARE NEITHER OF FRANCHISE IN NATURE OR THAT OF COLLABORATION AGREEMENT. ALL THE PAYMEN TS WERE MADE FROM THE ASSESSEES ACCOUNT ONLY. THE DR FURTHER SUBMITTED T HAT THE RESPECTIVE PARTIES WERE ONLY AGENTS AND THERE WAS DIFFERENT ARRANGEMEN T ALTOGETHER DIVERTING THE ACTUAL NATURE OF THE AGREEMENTS. THE DR RELIED UPO N PARA 4.7 OF THE ASSESSING OFFICER S ORDER. THE DR SUBMITTED THAT THE ASSESS ING OFFICER AND LD. CIT(A)S ORDER IS NON-SPEAKING IN THIS RESPECT AND IS REQUIR ED TO BE RESTORED BACK TO THE ASSESSING OFFICER. 6. THE AR SUBMITTED THAT THE LD. CIT(A) HAD PASSED THE ORDER AFTER PROPER PERUSAL OF ALL THE AGREEMENTS WHICH WERE ANNEXED TO PAPER BOOK & THE SAME WERE SUBMITTED BEFORE THE ASSESSING OFFICER AS WEL L AS LD. CIT(A). THEREFORE, LD. CIT(A)S ORDER IS JUST AND PROPER. 7. WE HAVE PERUSED ALL THE RECORDS AND HEARD BOTH T HE PARTIES. THE ASSESSEE HAS GIVEN ALL THE DETAILS RELATED TO COLLA BORATION AGREEMENT AS WELL AS AUDITED ACCOUNTS AND TAX AUDIT. THE SAME WAS ANNEXE D AT PAGE 152, 188 TO THE 4 ITA NO.1007/DEL/12 & ITA NO.3748/DEL/13 PAPER BOOK OF THE ASSESSEE AND SUBMITTED BEFORE THE AUTHORITIES BY THE ASSESSEE. THUS, THE RELEVANT MATERIAL AS TO HOW TH E PROFITS ARE EARNED WAS EXPLAINED BY THE ASSESSEE WITH RELEVANT DOCUMENTS B EFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE LD. CIT(A). THE CIT(A) HAS RI GHTLY HELD THAT AS PER THE TERMS OF THE AGREEMENTS, THE ASSESSEE WAS COLLECTIN G THE TOTAL REVENUE AND BOOKING THE SAME AS ITS INCOME OUT OF THE GROSS COL LECTIONS, REDUCING THE SERVICE TAX. THE AGREED PERCENTAGE OF REVENUE SHAR E IS BEING PAID TO THE PARTNER FRANCHISEES AND BOOKED THE SAME AS COMMISSI ON IN THE BOOKS OF ACCOUNTS. ALL THE PAYMENTS OF COMMISSION WERE PAID BY CHEQUES TO THE FRANCHISE AFTER DEDUCTING THE TAX AT SOURCE AT APPL ICABLE RATES. THIS FINDING OF THE CIT(A) IS RIGHT AND IS UPHELD. 8. IN RESULT, GROUND NO. 1 OF REVENUE IS DISMISSED. 9. GROUND NO. 2 RELATES TO ADDITION OF RS. 2,54,3 69 ON ACCOUNT OF EXCESS CLAIM OF RENT. THE ASSESSING OFFICER STATED THAT THE ASS ESSEE HAS SUBMITTED ONLY THE COPY OF RENTAL AGREEMENTS UP TO RS.90,000/- AS PER THE RENTAL AGREEMENT THE ASSESSEE WAS DUE TO PAY AN AMOUNT OF RS.10,80,000/- ON ACCOUNT OF THE RENTAL EXPENSES. THE ASSESSING OFFICER FURTHER HELD THAT IN RESPECT TO THE REMAINING RENTAL EXPENSES THE ASSESSEE HAD NO JUSTIFICATION I N TERMS OF ANY DOCUMENTS/EVIDENCES TO SUBSTANTIATE THE CLAIMS. FUR THER IN CASE OF THE BRANCH OUT LETS RENTAL EXPENSES OR OTHER PREMISES RELATED EXPENSES ARE TURN BY OTHER PARTIES AND IN CASE OF EMPLOYEES HRA WAS DEALT IN THEIR SALARY COMPONENT. HENCE NO ADDITIONAL RENTAL EXPENSES WERE ALLOWED AN D ADDITION OF RS.2,54,369/- WAS MADE BY THE ASSESSING OFFICER . 5 ITA NO.1007/DEL/12 & ITA NO.3748/DEL/13 10. THE LD. CIT(A) HELD THAT THE ASSESSEE HAS FILED COPIES OF TDS CERTIFICATES WHICH INCLUDED SERVICE TAX OF RS.1,00,116/- AND ARR EAR RENT OF RS.91,253/-. THE ADDITION WAS DELETED ON THE ACCOUNT OF PRODUCTI ON OF TDS CERTIFICATE BY THE CIT(A). 11. GROUND NO. 3 RELATES TO ADDITION OF RS. 3,97 ,930/- ON ACCOUNT OF BUSINESS PROMOTION EXPENSES. THE ASSESSING OFFICER HELD THAT THERE WAS NO BILLS IN RESPECT OF ANY OF THE LEDGER ENTRY & THE S AME WERE PROVIDED BY THE ASSESSEE IN RESPECT OF THE BUSINESS PROMOTION EXPEN SES. THE LD. CIT(A) IN ITS ORDER HAS GIVEN A FINDING THAT THE ASSESSEE PRODUCE D THE COPY OF LEDGER ACCOUNT ALONG WITH COMPLETE BILLS/VOUCHERS. THE LD. CIT(A) HAS PERUSED MAJOR BILLS WHICH WERE FILED BY THE ASSESSEE DURING THE COURSE OF THE LD. CIT(A)S PROCEEDINGS. 12. GROUND NO. 4 RELATES TO REPAIR AND MAINTEN ANCE EXPENSES. THE ASSESSING OFFICER FOUND THAT AS PER THE LEDGER ACCO UNT THESE EXPENSES WERE ONLY AMOUNTING TO RS.3,91,394/-. THE ASSESSING OFF ICER ADDED AN AMOUNT OF RS.39,623/- TO THE INCOME OF THE ASSESSEE ON ACCOUN T OF BEING THE BOGUS CLAIMS. THE LD. CIT(A) DELETED THE ADDITION OF RS. 2,35,320/- MADE BY THE ASSESSING OFFICER BY HOLDING THAT THE SAME IS ON ES TIMATED BASIS. 13. THE DR SUBMITTED THAT THERE WAS ADDITIONAL EVID ENCE PRODUCED BY THE ASSESSEE BEFORE THE CIT(A) WHICH WAS NOT AT ALL PRO DUCED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER REQUESTED FOR THE RE LEVANT DOCUMENTS IN RESPECT OF ADDITIONS MADE ON ACCOUNT OF EXCESS CLAIM OF REN T, BUSINESS PROMOTION EXPENSES AND REPAIRS AND MAINTENANCE. BUT ASSESSEE FAILED TO DO SO. THEREFORE, THE DR SUBMITTED THAT THE LD. CIT(A) SHOULD HAVE GI VEN THE OPPORTUNITY TO 6 ITA NO.1007/DEL/12 & ITA NO.3748/DEL/13 ASSESSING OFFICER AS PER RULE 46A AS RELATES TO AD DITIONAL EVIDENCES, WHICH THE LD. CIT(A) FAILED TO DO SO. THE AR RELIED UPON THE LD. CIT(A)S ORDER. 14. WE HAVE PERUSED ALL THE RELEVANT DOCUMENTS AND HEARD BOTH THE PARTIES. IT IS OBSERVED THAT IN RESPECT OF THE ADDITIONS MAD E ON ACCOUNT OF EXCESS CLAIM OF RENT, BUSINESS PROMOTION EXPENSES AND REPAIRS AN D MAINTENANCE, THE AO REQUESTED THE ASSESSEE TO FURNISH THE NECESSARY DET AILS FOR ENABLING HIM TO COMPLETE THE ASSESSMENT, BUT THE ASSESSEE DID NOT P ROPERLY COMPLY WITH. HOWEVER, THE LD. CIT(A) HAS DELETED THE ADDITION BY TAKING INTO CONSIDERATION SEVERAL DOCUMENTS/EVIDENCE, WHICH WERE NOT FURNISHE D BEFORE THE AO, WITHOUT GIVING ANY OPPORTUNITY TO THE AO IN TERMS OF RULE 4 6A. AS SUCH, HIS ACTION CANNOT BE COUNTENANCED. UNDER THE GIVEN CIRCUMSTANC ES, WE ARE OF THE CONSIDERED OPINION THAT THE ENDS OF JUSTICE WOULD M EET ADEQUATELY, IF THE IMPUGNED ORDER IS SET ASIDE AND THE MATTER IS RESTO RED TO THE FILE OF THE AO FOR DECIDING THESE ISSUES AFRESH AS PER LAW. WE ORDER A CCORDINGLY. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNI TY OF HEARING IN SUCH FRESH ASSESSMENT PROCEEDINGS. GROUND NOS. 2, 3 AND 4 OF T HE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES 15. IN RESULT, THE APPEAL IS PARTLY ALLOWED FOR STA TISTICAL PURPOSE. ITA NO. 3748/DEL/2013 THIS APPEAL IS AGAINST ORDER DATED 08/03/2013 PASSE D BY LD. CIT(A)S XXVI AND FILED BY THE REVENUE FOR THE A.Y 2009-10. 17. THE GROUNDS OF APPEALS ARE AS UNDER:- 7 ITA NO.1007/DEL/12 & ITA NO.3748/DEL/13 1. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS.25,51,872/- MADE ON ACCOUNT OF UNDISCLOSED INCOME FROM RUNNING OF SALOONS AT DEHRA DUN, FARIDABAD, NOIDA AND ROHINI AS OWN SHARE OF REVENUE OF THE ASSESSEE AND OVERLOOKING SHARING OF REVENUE IN 65:3 5 RATIO. 18. BOTH THE SIDES ARE IN AGREEMENT THAT THE FACTS AND CIRCUMSTANCES OF THIS GROUND ARE SIMILAR TO GROUND NO. 1 FOR THE ASSESSME NT YEAR 2008-09. FOLLOWING THE VIEW TAKEN HEREINABOVE, WE DECIDE THI S GROUND AGAINST THE REVENUE. 19. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 23 RD OF OCTOBER, 2015. SD/- SD/- (R.S. SYAL) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23/10/2015 R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT R EGISTRAR ITAT NEW DELHI 8 ITA NO.1007/DEL/12 & ITA NO.3748/DEL/13 DATE 1. DRAFT DICTATED ON 19.10.2015 PS 2. DRAFT PLACED BEFORE AUTHOR 20.10.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 21.10.2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 23.10.2015 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 23.10.2015 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 9 ITA NO.1007/DEL/12 & ITA NO.3748/DEL/13