ACIT 13(1), MUMBAI V. PAWANKUMAR SHARMA, MUMBAI

ITA 1472/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56319 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 28-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARATHASARATY NAIK
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Non-deduction of tax; Agreed addition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, A.M. AND SHRI V. DURGA RAO, J.M. ITA NO. 1472MUM/2010 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF INCOME-TAX-13(1), A PPELLANT R.NO. 427, 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020. VS. PAWANKUMAR SHARMA, RESPONDENT C/O RADHA ROADWAYS, 108, DOSHI CHAMBERS, SOLAPUR STREET, WADI BUNDER, MUMBAI 400 009. APPELLANT BY : MR. PARATHASARATY NAIK RESPONDENT BY : MR. HARI S. RAHEJA DATE OF HEARING : 28/12/2011 DATE OF PRONOUNCEMENT : 30/12/2011 ORDER PER B. RAMAKOTAIAH, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-24, MUMBAI PASSED ON 18/12/2009 FOR ASSESSME NT YEAR 2006- 07 WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GRO UNDS OF APPEAL: 1) THE LD. CIT(A), ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE AND IN LAW, ERRED IN DELETING AGREED DISALLOWA NCE OF RS. 15 LAKHS U/S 40(A)(IA) ON ACCOUNT OF NON-DEDUCTION OF TDS WITHOUT APPRECIATING THE FACT THAT SAID DISALLOWANCES AGREE D BY THE ASSESSEE VIDE ORDER SHEET NOTING DT. 30/12/08 ON TH E BASIS OF FACT THAT NON-DEDUCTION OF TAX ON THE SAID PAYMENT WHEREIN PRIVISION U/S 40(A)(IA) ATTRACTED HAS NOT BEEN ADHE RED TO. 2) THE LD. CIT(A), ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE AND IN LAW, ERRED IN DELETING THE ADDITION OF RS. 6 LACS ON ACCOUNT OF COMMISSION WITHOUT APPRECIATING THE FACT THAT THE SAID DISALLOWANCE AGREED BY THE ASSESSEE VIDE NORDER-SHE ET NOTING ITA NO. 1472/MUM/10 PAWANKUMAR SHARMA. 2 DT.30/12/08 ON THE BASIS OF FACT THAT ASSESSEE FAIL ED TO SUBSTANTIATE THE FALL IN THE COMMISSION INCOME. 3) THE LD. CIT(A), ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE AND IN LAW, ERRED IN DELETING ADDITION OF RS. 5 LACS MADE ON ACCOUNT OF FALL IN NET PROFIT FROM 1.04% TO 0.87% W ITHOUT APPRECIATING THE FACT THAT THE SAID ADDITION WAS AG REED BY THE ASSESSEE VIDE ORDER-SHEET NOTING DT. 30/12/08 ON TH E BASIS THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE FALL IN NET PROFIT. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN HIRING TRUCKS AND TRAILER S AND GIVING TO OTHER PARTIES ON HIRE AND ALSO COMMISSION AGENT. TH E ASSESSEE HAD DISCLOSED AN AMOUNT OF RS. 8,43,977/- ON THE TURNOV ER OF RS. 10,51,32,491/-. ON THE REASON THAT IN FORM NO. 3CD AT COLUMN NO. 27A THERE WAS A MENTION NO TDS WAS DEDUCTED DURING THE YEAR FROM TRANSPORTERS, THE AO ASKED THE DETAILS OF LIST OF TDS MADE, LIST OF PAYMENTS MADE TO INDIVIDUALS WHO ARE NOT COVERED BY THE PROVISIONS OF SECTION 194C. ON SUBMISSION OF THE DETAILS BY TH E ASSESSEE, THE AO RECORDED THAT THE ASSESSEE HAD MADE TDS TO THE EXTE NT OF RS. 1,52,955/- DURING THE YEAR, AND NOT DEDUCTED TDS ON THE PAYMENTS MADE TO CONTRACTORS NOT EXCEEDING 20,000/- OR AGGRE GATE OF RS. 50,000/- OR PAYMENTS MADE TO INDIVIDUAL, WHO DO NOT OWN MORE THAN 2 GOODS VEHICLES. HOWEVER, THE FINDING OF THE AO WA S THAT THERE ARE DISCREPANCIES IN FURNISHING THE VOUCHERS MAINTAINED , RS. 15 LACS WAS PROPOSED TO BE ADDED TO THE INCOME U/S 40(A)(IA) TO WARDS NON- COMPLIANCE OF TDS PROVISIONS. IN ADDITION TO THE AB OVE, THE AO NOTED THAT THE COMMISSION RECEIVED DURING THE YEAR WAS RS . 28,18,442/- AS AGAINST RS. 40,61,342/- IN THE IMMEDIATELY PRECEDIN G YEAR. HE, THEREFORE, MADE AN AD-HOC ADDITION OF RS. 6.00 LAKH S TOWARDS FALL IN COMMISSION RECEIPTS. IN ADDITION TO THE ABOVE AMOUN TS, THE AO ALSO MADE AN ADDITION OF RS. 5.00 LAKHS ON AD-HOC BASIS DUE TO FALL IN NET PROFIT @.87% AS AGAINST 1.04% IN THE IMMEDIATELY PR ECEDING YEAR. AS SEEN FROM THE ASSESSMENT ORDER, THE EXPLANATIONS OF THE ASSESSEE WERE ITA NO. 1472/MUM/10 PAWANKUMAR SHARMA. 3 NOT CONSIDERED, HOWEVER, THE AO MENTIONED THAT THE ASSESSEE AND AR OF THE ASSESSEE AGREED AND ENDORSED THE AFORESAID A DDITIONS MADE IN THE ORDER SHEET. IN APPEAL BEFORE THE CIT(A), THE A SSESSEE EXPLAINED VARIOUS ASPECTS OF TDS, FALL IN COMMISSION AND FURT HER FALL IN NET PROFIT TO SUBMIT THAT THERE IS NO NEED FOR MAKING A NY ADDITION AND ORDER OF THE AO IS ARBITRARY. THE LEARNED CIT(A) A FTER CONSIDERING THE FACT THAT THE ADDITIONS WERE AGREED AND ENDORSED TH E SAME IN THE ORDER SHEET, HELD THAT THERE CANNOT BE AN ASSESSMEN T BASED ON CONCESSIONS AND ENDORSEMENT IN THE ORDER SHEET BY T HE ASSESSEE. HE, THEREFORE, CONSIDERED THE ISSUE ON MERITS AND DELET ED THE AFORESAID THREE ADDITIONS MADE BY THE AO. AGGRIEVED, THE REVE NUE IS IN APPEAL BEFORE US. 3. IT IS THE CONTENTION OF THE REVENUE THAT THE CIT (A) SHOULD NOT HAVE GIVEN RELIEF ON THE AGREED ADDITIONS. THE LEAR NED AR SUBMITTED THAT THE ASSESSEE HAS NO OPTION BUT TO SIGN THE OR DER SHEET WHEN THE AO HAS MADE/PROPOSED THE ADDITIONS IN SPITE OF PROP ERLY EXPLAINING THE COMPLIANCE TO PROVISIONS OF THE ACT, AND FURNIS HING NECESSARY DETAILS. THEREFORE, THERE IS NO OPTION THAN TO CONT EST. 4. WE HAVE CONSIDERED THE ARGUMENT OF RIVAL COUNSEL S AND EXAMINED THE DETAILS PLACED ON RECORD. AS SEEN IN T HE ORDER OF THE AO, THE ADDITIONS ARE ARBITRARY IN NATURE. FIRST OF ALL , THE ASSESSEE EXPLAINED AND FURNISHED THE DETAILS THAT SUBSTANTIA L PAYMENTS WERE MADE FOR THE PARTIES BELOW RS. 20,000/- AT A TIME A ND DURING THE YEAR NOT EXCEEDING RS. 50,000/-, AS PER THE ANNEXURE, AM OUNTING TO RS. 72,21,198/-. HE FURTHER SUBMITTED THAT PAYMENTS TO OWNERS OF ONE OR TWO VEHICLES TO THE EXTENT OF RS. 8,14,51,814/-, TH EREFORE, NO TDS WAS DEDUCTIBLE ON THE SAID PAYMENTS, ON WHICH TDS PROVI SIONS ARE NOT APPLICABLE. IT WAS SUBMITTED THAT THE ASSESSEE DEDU CTED AN AMOUNT OF RS. 1,52,955/- AS TDS ON BALANCE PAYMENTS AS APPLIC ABLE. WE FIND ITA NO. 1472/MUM/10 PAWANKUMAR SHARMA. 4 THAT IN SPITE OF PLACING RELEVANT DETAILS ON RECORD , THE AO FINDS THAT THERE ARE DISCREPANCIES IN THE VOUCHERS AND ACCORDI NGLY RS. 15,00,000/- WAS PROPOSED TO BE ADDED TO THE INCOME OF THE ASSESSEE INVOKING THE PROVISIONS OF SECTION 40(A)(IA). AS PE R THE PROVISIONS OF SECTION 40(A)(IA), AMOUNTS WHICH ARE COVERED BY THE TDS PROVISIONS, BUT, ON WHICH TDS WAS NOT MADE SHOULD BE IDENTIFIED AND DISALLOWED AND THERE CANNOT BE ANY AD-HOC DISALLOWANCE. THE DI SALLOWANCE CANNOT BE MADE UNDER THE SAID SECTION ON THE GROUND OF DISCREPANCY IN THE VOUCHERS. THERE IS NO JUSTIFICATION OF MAKIN G ADDITION MADE ON THE PAYMENTS, WHICH ARE NOT COVERED BY TDS PROVISIO NS. 4.1 WITH REFERENCE TO COMMISSION INCOME ALSO, THE A SSESSEE TOOK STRONG OBJECTION THAT THE AO CHOSE TO MAKE AN ADDIT ION OF RS. 6.00 LAKHS ON THE COMMISSION INCOME, REJECTING THE EXPLA NATION OF THE ASSESSEE THAT DUE TO STIFF COMPETITION IN THE MARKE T IT HAD TO DO THE BUSINESS AT A LOWER MARGIN OF COMMISSION. WE ARE UN ABLE TO UNDERSTAND AS TO HOW THE COMMISSION WHICH WAS NOT EARNED BY THE ASSESSEE WAS BROUGHT TO TAX. WE ARE OF THE VIEW THA T THERE MAY BE SOME JUSTIFICATION IF AN ITEM OF EXPENDITURE IS DIS ALLOWED BUT NOTIONAL RECEIPTS/PROFITS CANNOT BE BROUGHT TO TAX AS WAS DO NE BY THE AO. 4.2 EVEN WITH REFERENCE TO THE ESTIMATION OF NET PR OFIT, IN SPITE OF MAKING TWO DISALLOWANCES AS STATED ABOVE, THE AO FU RTHER RESORTED TO ESTIMATION OF NET PROFIT WITHOUT REJECTING THE BOOK S OF ACCOUNT. EVEN THOUGH THE AO RECORDS THAT ALL THE ADDITIONS WERE A GREED BY THE AR AND THE ASSESSEE, WE ARE OF THE OPINION THAT THE CI T(A) HAS RIGHTLY DELETED THE ARBITRARY ADDITIONS MADE BY THE AO. IN FACT, THE REVENUES GROUND IS ONLY ON THE REASON THAT THE ASSESSEE HAS AGREED FOR THE ADDITIONS. IN OUR CONSIDERED OPINION, THERE IS NO J USTIFICATION ON MERITS TO MAKE ANY DISALLOWANCE/ADDITION. THE AO FA ILED TO EXPLAIN THE REASONS AS TO HOW THE SAID DISALLOWANCES ARE BR OUGHT TO TAX UNDER ITA NO. 1472/MUM/10 PAWANKUMAR SHARMA. 5 THE PROVISIONS OF THE ACT, AND JUST BECAUSE THE AS SESSEE CONCEDED THE AMOUNTS VOLUNTARILY OR OTHERWISE, MAKING THE ADDITI ONS ON SUCH GROUND CANNOT BE HELD TO BE PROPER. IN VIEW OF THE ABOVE, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE GROUNDS RAI SED BY THE REVENUE IN THIS REGARD. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF DECEMBER, 2011. SD/- SD/- (V. DURGA RAO) ( B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNT ANT MEMBER MUMBAI, DATED: 30 TH DECEMBER, 2011. KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, C BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI.