DCIT, Cir. 11(1), Pune V. Shri Rajendra Vishnu Jog, Pune

ITA 1068/PUN/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7554 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-02-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 04-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMANT KUMAR LEUVA
• Assessee Lawyers: RAJENDRA RANADE
• Section: 143(3); 147; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER S.NO . ITA NO. ASSTT.YEAR 1. 1068/PN/09 2001-02 2. 1069/PN/09 2002-03 3. 1070/PN/09 2003-04 4. 1071/PN/09 2004-05 5. 1072/PN/09 2005-06 DY. COMMISSIONER OF INCOME-TAX, CIR. II(1), PUNE .. APPELLANT VS. SHRI RAJENDRA V. JOG, Z-5, (1+2) HIMALI CO-OP HSG. SOCIETY, .. RESPONDENT ERANDWANE, PUNE PAN AAOPJ3395F APPELLANT BY : SHRI HEMANT KUMAR LEUVA RESPONDENT BY : SHRI RAJENDRA RANADE ORDER PER G.S. PANNU, A.M: THE CAPTIONED FIVE APPEALS BY THE REVENUE ARE DIRE CTED AGAINST A COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX (APP EALS)-I, PUNE DATED 30.06.2009 PERTAINING TO THE ASSESSMENT YEARS 2001- 02 TO 2005-06, WHICH IN TURN HAVE ARISEN FROM THE RESPECTIVE ORDERS PASSED BY THE ASSESSING OFFICER, ALL DATED 27.11.2008 UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) FOR THE A FORESAID ASSESSMENT YEARS. IN ALL THE APPEALS, A COMMON POINT HAS BEEN RAISED BY THE REVENUE, AND THE FACTS AND CIRCUMSTANCES ARE IDENTICAL IN ALL THE YE ARS. 2. THE COMMON GROUNDS OF APPEAL RAISED BY THE REVEN UE IN ALL THE CAPTIONED APPEALS READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD CIT (A) ERRED IN DIRECTING THE AO TO VERIFY THE CLAIM OF ASSESSEE TH AT HE IS FOLLOWING THE CASH SYSTEM OF ACCOUNTING FOR A.YS 2001-02 TO 2005-06 AND THE ASSE SSEE HAS NOT RECEIVED ANY SUM ON ACCOUNT OF GUARANTEE COMMISSION FROM M/S JOG ENG G. LTD. FOR A.YS 2001-02 TO 2005-06 WHICH TANTAMOUNT TO SET ASIDE THE ASSESSMEN TS. ITA NOS 1068-1072/PN/09 RAJENDRA V JOG 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD CIT (A) ERRED IN NOT CONSIDERING THE FACT THAT THE ADDITIONS MADE ON ACC OUNT OF PERSONAL GUARANTEE COMMISSION TO DIRECTORS HAVE BEEN INCLUDED IN THE T OTAL INCOME ON PROTECTIVE BASIS AMOUNTING TO FIGURES AS UNDER: A.Y AMOUNT 2001-02 27,41,784/- 2002-03 13,64,575/- 2003-04 17,27,879/- 2004-05 11,18,613/- 2005-06 10,78,499/- 3. AT THE TIME OF HEARING OF THE APPEALS, IT WAS PO INTED OUT THAT THE ASSESSING OFFICER IN AN ORDER DATED 31.7.2009 PASSE D UNDER SECTION 154 AND GIVING EFFECT TO THE IMPUGNED ORDER OF THE COMMISSI ONER OF INCOME-TAX (APPEALS) DATED 30.6.2009 HAS VERIFIED THE RECORD A ND RECTIFIED MISTAKE APPARENT FROM RECORD BY OBSERVING THAT ASSESSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING AND THUS THE IMPUGNED ADDITIONS WERE DELETED BECAUSE THE SAID AMOUNTS WERE NOT RECEIVED BY THE ASSESSEE FROM M/S JOG ENGG. LTD. IN THIS REGARD, IT WAS POINTED OUT BY THE LEARNED REPRESENT ATIVE FOR THE RESPONDENT ASSESSEE THAT THE CAPTIONED GRIEVANCE OF THE REVENU E IS NOT JUSTIFIED. THE LEARNED DEPARTMENTAL REPRESENTATIVE, APPEARING FOR THE REVENUE, HAS NOT CONTROVERTED THE ABOVE FACTUAL MATRIX, BUT HAS DEFE NDED THE PROTECTIVE ADDITION MADE BY THE ASSESSING OFFICER. THE LEARNED DEPARTME NTAL REPRESENTATIVE REFERRED TO THE GROUNDS OF APPEAL TO POINT OUT THAT THE DIRECTIONS GIVEN BY THE COMMISSIONER OF INCOME-TAX (APPEALS) TO THE ASSESSI NG OFFICER TANTAMOUNTED TO SETTING ASIDE OF THE ASSESSMENT BY THE COMMISSIO NER OF INCOME-TAX (APPEALS), WHICH WAS IMPERMISSIBLE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND HAVE ALSO PERUSED THE RESPECTIVE ORDERS OF THE AUTHORITIES BE LOW AS WELL AS THE OTHER MATERIAL PLACED ON RECORD. IN ALL THE CAPTIONED APP EALS, THE ISSUE INVOLVED RELATES TO ADDITION MADE BY THE ASSESSING OFFICE ON A PROTECTIVE BASIS ON ACCOUNT OF DIRECTORS COMMISSION. THE BACKGROUND OF THE ASSESSMENTS CAN BE UNDERSTOOD WITH REFERENCE TO THE FACTS IN RELATION TO ASSESSMENT YEAR 2001-02, WHICH ARE AS FOLLOWS. IN THE COURSE OF ASSESSMENT P ROCEEDINGS IN THE CASE OF ITA NOS 1068-1072/PN/09 RAJENDRA V JOG 3 M/S JOG ENGINEERING LTD., IT WAS FOUND THAT THE SAI D COMPANY HAD DEBITED AN AMOUNT OF RS 54,83,568/- UNDER THE HEAD DIRECTORS COMMISSION WHICH INCLUDED AN AMOUNT OF RS 27,41,784/- PAYABLE TO THE ASSESSEE, WHO WAS ONE OF THE DIRECTORS OF THE SAID COMPANY. IT IS NOTED B Y THE ASSESSING OFFICER THAT THE DEDUCTION FOR DIRECTORS COMMISSION WAS DISAL LOWED IN THE HANDS OF THE SAID COMPANY FOR THE REASON THAT SUCH COMMISSION HA D NOT BEEN PAID TO THE DIRECTORS AND HAS BEEN SHOWN AS OUTSTANDING AND THA T SIMILAR DISALLOWANCE WAS MADE EVEN FOR ASSESSMENT YEARS 2002-03 TO 2005- 06. THE ASSESSING OFFICER HAS ALSO NOTED THAT SUCH ADDITIONS IN THE H ANDS OF THE COMPANY WERE CONFIRMED BY THE COMMISSIONER OF INCOME-TAX (APPEAL S) AND THE MATTER WAS PENDING BEFORE THE INCOME-TAX APPELLATE TRIBUNAL BY WAY OF APPEALS PREFERRED BY THE SAID COMPANY. IN THE BACKGROUND OF THIS DISC USSION, THE ASSESSING OFFICER ADDED A SUM OF RS 27,41,784/- TO THE INCOME OF THE ASSESSEE FOR ASSESSMENT YEAR 2001-02 ON PROTECTIVE BASIS AS COMM ISSION RECEIVED FROM M/S JOG ENGINEERING LTD. 5. ON BEING CONFRONTED, ASSESSEE SUBMITTED BEFORE T HE ASSESSING OFFICER THAT HE HAD NOT RECEIVED OR REALIZED OR MADE ANY CL AIM OF ANY AMOUNT FROM M/S JOG ENGINEERING LTD., EITHER AS SERVICE CHARGES , COMMISSION OR REMUNERATION, OTHER THAN WHAT HAS ALREADY BEEN ACCO UNTED FOR AND SUBJECTED TO TAX FOR THE RESPECTIVE YEARS THROUGH THE INCOME- TAX RETURNS. IT WAS ALSO SUBMITTED THAT ASSESSEE HAD ACCOUNTED FOR ALL THE A MOUNTS RECEIVED DURING THE SAID RESPECTIVE YEARS. ASSESSEE ALSO POINTED OU T THAT HE WAS ADOPTING A CASH SYSTEM OF ACCOUNTING AND THE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED ACCORDINGLY. ASSESSEE ALSO SUBMITTED THAT THE COMP ANY HAD ISSUED FORM NO 16 FOR THE RESPECTIVE YEARS, INTER ALIA, CONFIRMING THE AMOUNT OF REMUNERATION PAID BY IT TO THE ASSESSEE FOR AND DURING THE CAPTI ONED YEARS AND WHICH HAVE BEEN OFFERED BY THE ASSESSEE TO TAX THROUGH THE INC OME TAX RETURNS. WITHOUT PREJUDICE, IT WAS POINTED OUT THAT THE COMPANY APPE ARS NOT TO HAVE COMPLIED WITH THE TDS FORMALITIES OR HAS NOT ISSUED ANY ADVI CE TO THE ASSESSEE IN ITA NOS 1068-1072/PN/09 RAJENDRA V JOG 4 RESPECT OF AMOUNTS SOUGHT TO BE ASSESSED BY THE AS SESSING OFFICER AND THEREFORE IT WAS SUBMITTED BY THE ASSESSEE THAT THE ENTRIES, IF ANY, MADE BY THE COMPANY APPEAR TO HAVE BEEN EFFECTED UNILATERAL LY. IN THIS MANNER, THE ASSESSEE RESISTED THE ADDITION MADE BY THE ASSESSIN G OFFICER. THE ASSESSING OFFICER HAS MADE THE ADDITION ON PROTECTIVE BASIS A FTER NOTICING THE ABOVE SUBMISSIONS OF THE ASSESSEE, ON A SINGLE POINT THAT THE DISALLOWANCE OF EXPENDITURE UNDER THE HEAD DIRECTORS COMMISSION WAS MADE N THE HANDS OF THE COMPANY, WHICH WAS PENDING IN APPEAL BEFORE THE INCOME-TAX APPELLATE TRIBUNAL 6. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), ON VARIED POINTS. IN ADDITION TO THE POINTS RAISED BEFORE THE ASSESSING OFFICER, ASSESSEE POINTED OUT THAT H E HAD FILED THE ORIGINAL RETURN OF INCOME ON THE BASIS OF THE FORM NO 16 ISS UED TO HIM BY M/S JOG ENGINEERING LTD. IN WHICH IT WAS CLEARLY STATED THA T THE FIGURE OF GROSS SALARY WAS INCLUSIVE OF THE COMMISSION. FURTHER, AS PER TH E ASSESSEE THE ACTUAL AMOUNT REFERRED TO AS COMMISSION RECEIVED BY THE AS SESSEE FROM THE COMPANY WAS RS 14,09,334/- AND THE SAME HAS BEEN DU LY REFLECTED IN THE RETURN OF INCOME FILED AND THEREFORE THERE WAS NO J USTIFICATION FOR MAKING ADDITION OF RS 27,41,784/-. IT WAS SUBMITTED THAT T HE ASSESSEE HAS BEEN OBSERVING CASH SYSTEM OF ACCOUNTING AND THE ASSESSI NG OFFICER NEITHER CONTROVERTED THIS FACT AND NOR RAISED ANY OBJECTION THERETO AND, THEREFORE, THE ASSESSEE WAS REQUIRED TO ACCOUNT FOR HIS INCOMES, O NLY UPON ITS ACTUAL RECEIPT. IN THIS CONTEXT, IT WAS ARGUED THAT WHATEVER AMOUNT THAT HAS BEEN ACTUALLY PAID BY COMPANY AND RECEIVED BY THE ASSESSEE DURING THE CONCERNED YEAR, IT HAS BEEN DULY REFLECTED IN THE RETURN OF INCOME AND THEREFORE THE ADDITION MADE BY THE ASSESSING OFFICER WAS FACTUALLY NOT MAI NTAINABLE. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS SUCCINCTLY REPRODUCED THE SUBMISSIONS OF THE ASSESSEE IN PARA 3.2 OF HIS ORDE R. AFTER CONSIDERING THE DETAILED SUBMISSIONS, THE LEARNED COMMISSIONER OF I NCOME-TAX (APPEALS) ITA NOS 1068-1072/PN/09 RAJENDRA V JOG 5 DIRECTED THE ASSESSING OFFICER TO VERIFY WHETHER TH E ASSESSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING AND WHETHER THE ASSESSEE HAS NOT RECEIVED ANY AMOUNT ON ACCOUNT OF GUARANTEE COMMISSION FROM THE COMPANY; AND, IF THE ABOVE CLAIMS WERE FOUND TO BE CORRECT, THE ADDITION WAS TO BE DELETED. THE RELEVANT DISCUSSION IN THE ORDER OF THE COMMISSIONE R OF INCOME-TAX (APPEALS) CONTAINED IN PARA 3.4, IS AS FOLLOWS: I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND PERUSED MATERIAL ON RECORD. ON GIVEN FACTS, I AM OF THE CONSIDERED VIEW THAT THIS IS A FIT CASE FOR ISSUE OF DIRECTION TO THE AO. ACCORDINGLY, THE A.O IS DIRECT ED TO VERIFY THE CLAIM OF THE APPELLANT THAT THE APPELLANT IS FOLLOWING CASH SYSTEM OF ACCO UNTING FOR ALL THE ASSESSMENT YEARS UNDER APPEAL AND APPELLANT HAS NOT RECEIVED EVEN A PENNY OF AMOUNT OF GUARANTEE COMMISSION FROM M/S JOG ENGG. LTD. PUNE FOR ALL ASS ESSMENT YEARS UNDER APPEAL. IF THIS CLAIM OF THE APPELLANT IS FOUND TO BE CORRECT FOR THE RELEVANT ASSESSMENT YEAR UNDER APPEAL, THE ADDITION MADE BY THE LD. A.O IN T HE RESPECTIVE ASSESSMENT YEARS SHALL STAND DELETED. WITH THIS DIRECTION, ROUNDS OF APPEAL NO 1 TO 7 FOR ALL THE ASSESSMENT YEARS UNDER APPEAL STAND DISPOSED. 7. IN THIS BACKGROUND, THE ASSESSING OFFICER CARRIE D OUT A VERIFICATION EXERCISE AND PASSED AN ORDER DATED 31.7.2009 (SUPR A), THE RELEVANT PORTION OF WHICH READS AS UNDER: ON VERIFICATION OF RECORD, IT IS SEEN THAT THE ASS ESSEE HAS DECLARED, IN THE RETURN OF INCOME THAT HE IS FOLLOWING CASH SYSTEM OF ACCOUNT ING. IN THE ASSESSMENT ORDER IT WAS ERRONEOUSLY MENTIONED THAT THE ASSESSEE IS FOLL OWING MERCANTILE METHOD OF ACCOUNTING. BY THIS ORDER, THE MISTAKE BEING APPARE NT FROM RECORD IS RECTIFIED U/S 154. SINCE THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCO UNTING AND HAS NOT RECEIVED ANY PENNY OUT OF THE DIRECTORS COMMISSION AMOUNTING TO RS 27,41,784/- PAYABLE BY M/S JOG ENGINEERING LTD. THE ADDITION OF RS 27,41,784/- IS DELETED. 8. IN TERMS OF THE AFORESAID, IT EMERGES THAT ASSE SSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING AND SECONDLY, THAT THE ASSESSE E HAS NOT RECEIVED ANY AMOUNT OUT OF RS 27,41,784/- ADDED IN THE ASSESSMEN T ORDER DT 27.11.2008 AS DIRECTORS COMMISSION PAYABLE BY JOG ENGINEERING LT D. SINCE THE AFORESAID FINDINGS HAVE BEEN ARRIVED AT BY THE ASSESSING OFFI CER AFTER VERIFICATION OF RECORD, THE SAME ARE NOT IN DISPUTE, AND WE FIND NO REASON TO DEVIATE FROM THE CONCLUSION OF THE ASSESSING OFFICER IN HIS ORDER DT 31.7.2009, THAT THE ADDITION OF RS 27,41,784/- IS NOT WARRANTED. IN FACT, IN THE FACE OF THE ORDER OF THE ASSESSING OFFICER DATED 31.7.2009 (SUPRA), THE GRIE VANCE RAISED BY THE REVENUE IN THE CAPTIONED APPEAL IS NOT AT ALL WELL FOUNDED. 9. IN SO FAR AS THE ARGUMENTS OF THE LD DR REGARDIN G THE MAINTAINABILITY OF THE DIRECTIONS GIVEN BY THE COMMISSIONER OF INCOME- TAX (APPEALS) TO THE ITA NOS 1068-1072/PN/09 RAJENDRA V JOG 6 ASSESSING OFFICER TO CARRY OUT THE VERIFICATION EXE RCISE IS CONCERNED, WE FIND NO INFIRMITY IN THE SAME. IN OUR CONSIDERED OPINION, T HE IMPUGNED DIRECTIONS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) DO NOT INFRING E THE POWERS VESTED WITH HIM IN TERMS OF SECTION 251(1)(A) OF THE ACT. SECON DLY, WITH REGARD TO THE OBSERVATION OF THE LD DR THAT THE ASSESSING OFFICER MADE THE ADDITION BY NOTICING THAT THE MATTER RELATING TO THE ADDITION I N THE HANDS OF THE COMPANY WAS PENDING BEFORE THE ITAT, THE SAME IN OUR VIEW D OES NOT DISTRACT FROM THE CORRECTNESS OF THE IMPUGNED ORDER OF THE COMMISSION ER OF INCOME-TAX (APPEALS) READ WITH THE ORDER OF THE ASSESSING OFFI CER DT 31.7.2009 (SUPRA). IN THE COURSE OF HEARING BEFORE US, IT WAS ALSO POINTE D OUT BY THE PARTIES THAT SUBSEQUENT TO THE IMPUGNED ORDER OF THE ASSESSING O FFICER, APPEALS OF THE COMPANY, M/S JOG ENGG LTD. FOR THE ASSESSMENT YEAR 2002-03 AND 2003-04 PENDING WITH THE INCOME-TAX APPELLATE TRIBUNAL VIDE ITA NOS 412 & 1130/PN/06 WERE DISPOSED OFF BY THE TRIBUNAL VIDE O RDER DATED 30.9.2008, A COPY OF THE SAID ORDER WAS ALSO PLACED ON RECORD. T HE TRIBUNAL RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FO R DE NOVO INVESTIGATION AND PASSING OF FRESH ORDERS AS PER DIRECTIONS CONTAINED THEREIN. WE HAVE PERUSED THE SAID DECISION AND ALSO CONSIDERED THE MANNER IN WHICH THE IMPUGNED ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) H AS DEALT WITH THE PROTECTIVE ADDITION MADE IN THE HANDS OF THE ASSESS EE. BEFORE US, THERE IS NO CONTROVERSION TO THE PLEA OF THE ASSESSEE ACCEPTED BY THE ASSESSING OFFICER IN HIS ORDER DATED 31.7.2009 (SUPRA) THAT THE IMPUGNED AMOUNT HAS NOT BEEN RECEIVED BY HIM. THEREFORE, THE INCLUSION OF THE IM PUGNED AMOUNT IN THE HANDS OF THE ASSESSEE IS UNJUSTIFIED AT THE PRESENT STAGE , ESPECIALLY WHEN THE ASSESSMENT OF THE CORRESPONDING AMOUNT IN THE HANDS OF THE COMPANY IS UNCLEAR. WE THEREFORE FIND NO REASONS TO INTERFERE WITH THE IMPUGNED ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). SO, HOWEV ER, AS A CONSEQUENCE OF THE ORDER OF THE TRIBUNAL DATED 30.9.2008 (SUPRA ) IN THE CASE OF JOG ENGINEERING LTD. ANY ADDITION IS FOUND ULTIMATELY M AINTAINABLE IN THE HANDS OF ITA NOS 1068-1072/PN/09 RAJENDRA V JOG 7 THE COMPANY, THE ASSESSING OFFICER SHALL BE WITHIN HIS POWERS TO EXAMINE ITS CONSEQUENTIAL EFFECT, IF ANY, IN THE HANDS OF THE ASSESSEE, IN ACCORDANCE WITH AND AS PER THE PROVISIONS OF THE ACT. 10. SUBJECT TO THE AFORESAID, WE HEREBY HOLD THE GR OUNDS OF APPEAL RAISED BY THE REVENUE AS DEVOID OF MERIT AND THE SAME ARE ACCORDINGLY DISMISSED. THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2001- 02 IS DISMISSED. 11. ON THE ABOVE PARITY OF REASONING, THE APPEALS O F THE REVENUE FOR OTHER ASSESSMENT YEARS UNDER REFERENCE ALSO STAND DISMISS ED. 12. IN THE RESULT, THE CAPTIONED APPEALS FILED BY T HE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 23RD DAY OF FE BRUARY, 2011. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G.S. PA NNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED:23 RD FEBRUARY, 2011 COPY TO:- 1) RAJENDRA V JOG, PUNE 2) DCIT CIR 11(1) PUNE 3) THE CIT (A)-1, PUNE 4) THE CIT-1, PUNE. 5) THE DEPARTMENTAL REPRESENTATIVE, B BENCH, ITAT,PUNE BY ORDER TRUE COPY ASST. REGISTRAR, I.T.A.T., PUNE B