ACIT 15(2), MUMBAI V. JUSTIN P PONMANY, MUMBAI

ITA 1420/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71388 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 22-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 01-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S S PHADKAR
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH, MUMBAI , BEFORE SHRI H.L.KARWA , PRESIDENT & SHRI N.K.BILLAIYA , AM ITA N O. 1420 / MUM/ 20 1 2 ( ASSESSMENT YEAR : 20 0 7 - 20 0 8 ) ACIT 15(2) , MUMBAI - 400 008 VS. M/S JUSTIN P. PONMANY, 101/B, SUMMERSET BLDG., CHARKOP KHANDIVALI (W), MUMBAI - 400 067 PAN/GIR NO. : A LIPP 1619 F ( APPE LLANT ) .. ( RESPONDENT ) /REVENUE BY : MR. SHISHIR SRIVASTAVA /ASSESSEE BY : M R. S.S.PHADKAR DATE OF HEARING : 22 ND DATE OF PRONOUNCEMENT : 2 2 ND OCTOBER, 2013 O R D E R PER N.K.BILLAIYA , AM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 26 , MUMBAI , DATED 5 - 12 - 2011 , PERTAINING TO ASSESSMENT YEAR 20 0 7 - 200 8 . 2 . THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE RE VENUE IS THAT THE CIT(A) ERRED IN DELETING THE SUO MOTU ADDITION OF RS. 22,11,000/ - MADE BY THE ASSESSEE ON ACCOUNT OF DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. ITA NO. 1420 /1 0 2 3 . THE CONCISE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PAINTER AND SOLD THE PAINTS AND ART WORKS DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. DURING THE COURSE OF THE SCRUTINY PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS PAID RS. 22,11,000/ - AS PROFESSIONAL FEES WITHOUT DEDUCTING TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 194J OF THE ACT. THE AO FURTHER NOTICED THAT THE AUDITORS HAVE QUALIFIED THEIR REPORT IN RESPECT OF THESE PAYMENTS OF PROFESSIONAL FEES AND FURTHER NOTICED THAT THE DISALLOWANCE HAS ALREADY BEEN MADE WHILE PREPAR ING THE COMPUTATION OF THE TOTAL INCOME. 4 . BEFORE THE CIT(A) THE ASSESSEE POINTED OUT THAT IT HAS CLAIMED BEFORE THE AO THAT THE PROVISIONS OF SECTION 194J ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. IT WAS POINTED O UT BEFORE THE CIT(A) THAT THIS WAS BROUGHT TO THE NOTICE OF THE AO VIDE LETTER DATED 19 - 110 - 2009, WHICH HAS NOT BEEN CONSIDERED BY THE AO NOR ANY MENTION IN THE ASSESSMENT ORDER. THE ASSESSEE REITERATED ITS POINT OF VIEW BEFORE THE CIT(A) THAT THE DISALLOW ANCE UNDER SECTION 40(A)(IA) MADE BY THE ASSESSEE SUO MOTU WAS INADVERTENT AS THE PROVISIONS OF SECTION 194 J D O NOT APPLY IN THE CASE OF THE ASSESSEE. THE CIT(A) CALLED FOR REMAND REPORT FROM THE AO. IN THE REMAND REPORT, THE AO SUBMITTED THAT THE ASSESSEE HAS NOT PROVIDED ANY SUPPORTING DOCUMENTS TO SUPPORT HIS CLAIM THAT THE ASSESSEE WAS NOT LIABLE FOR AUDIT UNDER SECTION 44AB . IT WAS CLAIMED BEFORE THE CIT(A) THAT IN THE PRECEDING ASSESSMENT YEARS, THE TURNOVER ITA NO. 1420 /1 0 3 OF THE ASSESSEE RANGED BETWEEN RS. 4.81 LAKH S TO RS.21.03 LAKHS AND CLAIMED THAT THE TURNOVER OF THE ASSESSEE EXCEEDED RS. 40 LAKHS FOR THE FIRST TIME DURING THE YEAR UNDER CONSIDERATION AND, THEREFORE, THE PROVISIONS OF SECTION 194J READ WITH ITS PROVISO DO NOT APPLY IN THE CASE OF THE ASSESSEE. AFT ER CONSIDERING THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE AND THE REMAND REPORT OF THE AO, THE CIT(A) CAME TO THE CONCLUSION THAT THE ASSESSEE IS ENTITLED FOR THE DELETION OF THE ADDITION ON ACCOUNT OF DISALLOWANCE UNDER SECTION 40(A)(IA) AND DIRECTED T HE AO TO DELETE THE SUO MOTU ADDITION OF RS. 22,11,000/ - . AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL HERE BEFORE US. 5 . LEARNED DR STRONGLY SUPPORTED THE FINDINGS OF THE AO. IT IS THE SAY OF THE DR THAT THE ASSESSEE IS A PAINTER AND SELLS THE PAINTING AND ART WORKS. HENCE, HE IS ENGAGED IN A PROFESSION. THEREFORE, THE TAX AUDIT LIMIT APPLICABLE FOR THE ASSESSEE IS RS. 10,00,000/ - AND NOT RS. 40,00,000/ - , WHICH IS APPLICABLE IN THE CASE OF A BUSINESSMAN. LEARNED DR FURTHER SUBMITTED THAT THE PROVISIONS OF SEC TION 44AB WERE VERY MUCH APPLICABLE TO THE ASSESSEE IN THE PRECEDING ASSESSMENT YEAR ALSO. THOUGH THIS FACT HAS NOT BEEN CONSIDERED BY THE AO BUT NEVERTHELESS THIS YEAR CANNOT BE CONSTRUED AS THE FIRST YEAR OF TAX AUDIT AND, THEREFORE, THE PROVISIONS OF SE CTION 194J ARE VERY MUCH APPLICABLE AND THE AUDITORS HAVE VERY RIGHTLY DISALLOWED RS. 22,1,000/ - IN THE COMPUTATION OF INCOME. ITA NO. 1420 /1 0 4 6 . PER CONTRA , THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE ASSESSEE IS NOT IN A PROFESSION BUT DOING BUSINESS IN THE SAL E OF PAINTINGS AND ART WORKS. THEREFORE, THE THRESHOLD LIMIT APPLICABLE FOR GETTING THE BOOKS OF ACCOUNTS AUDITED IS RS. 40 LAKHS AND SINCE THIS IS THE 1 ST YEAR OF TAX AUDIT, THE PROVISIONS OF SECTION 194J READ WITH ITS PROVISO DO NOT APPLY IN THE CASE OF A SSESSEE. THE ASSESSEE HAS ERRONEOUSLY DISALLOWED A SUM OF RS. 22,11,000/ - AND THE CIT(A) HAS RIGHTLY DIRECTED THE AO TO DELETE THE SAID DISALLOWANCE . 7 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED ORDER OF THE LOWER AUTHORITIES . IT IS NOT IN DISPUTE THAT THE ASSESSEE IS SELLING PAINTINGS AND ART WORKS. IT IS ALSO AN UNDISPUTED FACT THAT THE ASSESSEE HIMSELF IS A PAINTER AND SELLING HIS OWN PAINTINGS AND ART WORKS. THEREFORE, THE ASSESSEE CAN BE CONSIDERED TO BE IN A VOCATION. THIS ASP ECT HAS NEITHER BEEN CONSIDERED BY THE AO NOR BY THE CIT(A) AS TO WHETHER THE PROVISIONS OF SECTION 194J APPLY IN THE CASE OF THE ASSESSE E WOULD DEPEND UPON THE FINDING OF THE FACT WHETHER THE ASSESSEE IS IN PROFESSION OR IN BUSINESS ? T HEREFORE, WE RESTO RE THIS ISSUE BACK TO THE FILES OF THE AO. THE AO IS DIRECTED TO VERIFY THE TRUE NATURE OF ASSESSEES VOCATION/BUSINESS/PROFESSION AND ACCORDINGLY DECIDE THE ISSUE AFRESH AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO ESTABLISH BY BRINGING COGENT MATERIAL EVIDENCE ON RECORD THAT HE IS IN THE BUSINESS AND NOT IN PROFESSION/VOCATION. ITA NO. 1420 /1 0 5 8 . RESULTANTLY , THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2 2 /10/ 2013 . SD/ - ( ) ( H.L.KARWA ) SD/ - ( ) ( N.K.BILLAIYA ) / PRESI DENT / ACCOUNTANT MEMBER MUMBAI ; DATED : 2 2 /10 /2013 /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI