The ITO, Ward-3(3), Surat V. Smt. Indira Rakesh Nahata, Surat

ITA 1721/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80355 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 04-09-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 21-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Assessee Lawyers: S B VAIDYA
• Keywords: Business income; Corroborative evidences
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SRI G.C. GUPTA, VICE PRESIDENT AND SHRI ANIL CHATURVEDI, ACCOUNTAN T MEMBER INCOME TAX OFFICER, WARD-3(3), ROOM NO. 209, 2 ND FLOOR, AYAKAR BHAVAN, MAJURAGATE, SURAT (APPELLANT) VS SMT. INDIRA RAKESH NAHATA, P/O JAY LOGISTIC, A-6, NILKAMAL APARTMENT, ATHWALINES, SURAT PAN: ACNPN9118N (RESPONDENT) REVENUE BY: SRI ROOPCHAND, SR.D.R. ASSESSEE BY: SRI S.B. VAIDYA, A.R. DATE OF HEARING : 04-09-2014 DATE OF PRONOUNCEMENT : 12-09-20 14 / ORDER PER : ANIL CHATURVEDI, ACCOUNTANT MEMBER:- THIS IS THE REVENUES APPEAL AGAINST THE ORDER OF LD. CIT(A)-II, SURAT DATED 26-02-2010. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RE CORD ARE AS UNDER. ITA NO. 1721/AHD/2010 ASSESSMENT YEAR 2006-07 I.T.A NO. 1721/AHD/2010 A.Y. 2006-07 PAGE NO ITO VS. SMT. INDIRA RAKESH NAHATA 2 3. ASSESSEE IS AN INDIVIDUAL AND STATED TO BE ENGAG ED IN THE BUSINESS RELATED TO TELEPHONE CABLING, CREDIT VERIFICATION, TELEPHONE INSTALLATION, REPAIRS AND RETRIEVAL ETC. EXCLUSIVELY FOR TATA TEL E SERVICES IN THE NAME AND STYLE OF HER PROPRIETARY CONCERN JAY LOGISTICS . ASSESSEE FILED HER RETURN OF INCOME FOR A.Y. 2006-07 ON 26-12-2006 DIS CLOSING THE TOTAL INCOME AT RS. 2,28,460/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S. 143(3) VI DE ORDER DATED 18-12- 2008 AND THE TOTAL INCOME WAS DETERMINED AT RS. 23, 17,360/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEF ORE LD. CIT(A). LD. CIT(A) VIDE ORDER DATED 26-02-2010 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REV ENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING EFFECTIVE GR OUNDS. [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD, CIT(A), HAS ERRED IN RESTRICTING THE ADDITION MADE BY THE A.O. OF RS.3,81,000/- TO RS.48,600/- ON ACCOUNT OF UNEXPLAI NED CASH CREDITS U/S 68 OF THE IT ACT. [2] ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE MA DE BY THE AO OF RS.5,56,255/- OUT OF UNVERIFIABLE EXPENSES TO RS.2, 78,127/- AND DELETING THE DISALLOWANCE OF RS.1,01,381/- MADE OUT OF UNVER IFIABLE ADMINISTRATIVE EXPENSES. [3] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE A.O. OF RS. 7,82,398/-BEING UNDISCLOSED RECEIPTS. FIRST GROUND IS WITH RESPECT TO DELETION OF THE ADD ITION MADE U/S. 68 OF THE ACT. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT ASSESSEE HAD TAKEN UNSECURED LOAN FROM VARIOUS PERS ONS LISTED AT PAGE 3 OF HIS ORDER. THE AO ASKED THE ASSESSEE TO PRODUCE THE PERSONS FROM WHOM SHE HAD TAKEN UNSECURED LOANS AND ALONG WITH T HEIR CONFIRMATIONS I.T.A NO. 1721/AHD/2010 A.Y. 2006-07 PAGE NO ITO VS. SMT. INDIRA RAKESH NAHATA 3 AND PAN NOS. AO NOTICED THAT ASSESSEE HAD FAILED TO PRODUCE THE PERSONS FROM WHOM SHE HAD CLAIMED TO HAVE TAKEN THE LOANS. HE ALSO NOTICED THAT ASSESSEE HAD STATED TO HAVE TAKEN UNSECURED LOANS O F RS. 17,600/- FROM SMT SANGEETA SHAH. SRI SANJAY SHAH, HUSBAND OF SMT . SANGEETA SHAH SUBMITTED THAT HIS WIFE HAS NOT GIVEN ANY LOANS TO THE ASSESSEE. WITH RESPECT TO SRI JAYRARM DESAI AND SRI K.S. MISHRA FR OM WHOM THE ASSESSEE HAD STATED TO HAVE TAKEN CASH LOANS OF RS. 15,500/- EACH, AO DEPUTED INSPECTOR FOR MAKING SPOT INQUIRY. AO NOTED THAT O N SPOT VERIFICATION, IT WAS REVEALED THAT NO SUCH PERSONS WERE TRACED AT THE AD DRESS GIVEN BY THE ASSESSEE. HE THEREFORE CONCLUDED THAT THE LOANS TA KEN BY THE ASSESSEE FROM ALL THE 22 PERSONS AS BOGUS AND NON-GENUINE MO RE SO BECAUSE ALL THE LOANS WERE TAKEN IN CASH. HE ACCORDINGLY ADDED THE TOTAL UNSECURED LOAN AMOUNTING TO RS. 3,81,000/- U/S. 68 OF THE ACT. 5. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED T HE MATTER BEFORE LD. CIT(A). LD. CIT(A) GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER:- 6. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS. TO BEGIN WITH, WHAT I FIND IS THAT, OUT OF 23 PERSONS FROM WHOM THE ASS ESSEE HAD CLAIMED TO HAVE TAKEN LOANS, 22 WERE IN CASH. ONLY ONE L OAN OF RS 5,13,857 WAS THROUGH CHEQUE. THE GENUINENESS OF THE LOAN O F RS 5,13,857 WAS ACCEPTED FROM RAKESH NAHATA WHO WAS THE HUSBAND OF THE ASSESSEE BUT THE AO DOUBTED GENUINENESS OF THE LOANS TAKEN FROM THE OTHER 22 PERSONS IN CASH. I AGREE WITH THE ARS THAT THE PERSONS FROM WHOM THE CASH LOANS WERE TAKEN WERE PERSONS OF SMALL MEANS AND THE ASSE SSEE COULD NOT BE EXPECTED TO GET THEIR FINANCIAL RECORDS FOR BEING PRODUCED BEFORE THE AO. SHRI JAYRAM DESAI AND SHRI K.S. MISHRA WORK IN SURA T GOODS TRANSPORT CO. AND SANGEETA SHAH WAS THE WIFE OF SANJAY SHAH W HO PERFORMED THE WORK OF CONNECTION AND REPAIRS FOR ASSESSEE. THE GE NUINENESS OF THE LOANS COULD NOT BE DOUBTED SIMPLY ON THE GROUND THA T THEY WERE TAKEN IN CASH. THE AO SHOULD HAVE CONDUCTED COMPLETE INQUIR IES WITH REGARD TO ALL THE 22 PERSONS FROM WHOM THE ASSESSEE CLAIMED TO HA VE TAKEN THE LOANS IN CASH, BUT HE LIMITED HIS INQUIRIES/INV ESTIGATION ONLY TO THREE PERSONS AND APPLIED THE SAME TO ALL THE 22 PERSONS, WHICH WAS NOT FAIR AND JUSTIFIED. CONSEQUENTLY, THE AO'S ACTION IN TRE ATING ALL SUCH LOANS AS UNEXPLAINED IS NOT ACCEPTABLE. HOWEVER, THE ARS HA VE NOT BEEN ABLE TO I.T.A NO. 1721/AHD/2010 A.Y. 2006-07 PAGE NO ITO VS. SMT. INDIRA RAKESH NAHATA 4 REBUT THE FINDINGS GIVEN BY THE AO WITH REGARD TO SAGEETA SHAH, JAYRAM DESAI AND K.S. MISHRA WHICH MEANS THAT THE LOANS STANDING IN THEIR NAMES WERE UNEXPLAINED AND WERE JUSTIFIABLY T REATED AS UNEXPLAINED. THE AO IS DIRECTED TO RESTRICT THE ADDITION TO THE EXTENT OF 17,600 + RS 15,500 + RS 15,500 = RS 48,600. THE ASSESSEE WIL L GET RELIEF OF RS. 3,32,400. THE AO IS DIRECTED TO TAKE ACTION ACCORDI NGLY. 6. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. BEFORE US LD. DR SUPPORTED THE ORDER OF AO AND FURTHER SUBMITTED THAT THE PERSONS FROM WHOM THE CASH LOANS WERE TAKEN WERE ALL PERSONS OF SMALL MEANS. HE FURTHER SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS GIVEN SUFFI CIENT OPPORTUNITY TO FURNISH THE COPY OF THE ACCOUNT, THE CONFIRMATION L ETTERS AND THEIR ADDRESSES SO THAT NECESSARY INQUIRY COULD BE MADE B UT ASSESSEE HAD FAILED TO FURNISH THE REQUIRED INFORMATION. IN SUC H CIRCUMSTANCES, THE AO WAS FULLY JUSTIFIED IN MAKING THE ADDITION. LD. AR ON THE OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD. C IT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAD TAKEN UNSECURED LOANS FROM 23 PERSONS OUT OF WHICH LOAN FROM 22 PERSONS W ERE IN CASH AND THE AGGREGATE AMOUNT RECEIVED FROM THE 22 PERSONS WAS R S. 3,81,100/-. IT IS ALSO A FACT THAT ON THE SPOT INQUIRY MADE IN THE CA SE OF TWO PERSONS NAMELY SHRI JAIRAM DESAI AND SHRI K.S. MISHRA, THEY WERE N OT FOUND TRACEABLE. IT IS ALSO A FACT THAT BASED ON THE INQUIRY MADE IN CA SE OF THE AFORESAID PERSONS, AO PROCEEDED TO MAKE THE DISALLOWANCE IN C ASE OF REMAINING 19 PERSONS ALSO. IT IS ALSO A FACT THAT AO DID NOT MA KE ANY INQUIRY WITH RESPECT TO OTHER PERSONS. IT IS THUS SEEN THAT THE ADDITION IN CASE OF 22 PERSONS HAS BEEN MADE ONLY ON THE BASIS OF INQUIRY MADE IN CASE OF 3 PERSONS. LD. CIT(A) WHILE DELETING THE ADDITION HA S NOTED THAT NO ADDITION I.T.A NO. 1721/AHD/2010 A.Y. 2006-07 PAGE NO ITO VS. SMT. INDIRA RAKESH NAHATA 5 IN CASE OF 22 PERSONS CAN BE MADE ONLY ON THE BASIS OF INQUIRY MADE WITH 3 PERSON. BEFORE US, REVENUE HAS NOT PLACED ANY MAT ERIAL ON RECORD TO CONTROVERT THE FINDINGS OF LD. CIT(A). IN VIEW OF THESE FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AN D THUS THIS GROUND OF REVENUE IS DISMISSED. SECOND GROUND IS WITH RESPECT TO DELETION OF DISALL OWANCE MADE ON ACCOUNT OF UNVERIFIABLE EXPENSES. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT ASSESSEE HAD DEBITED TO THE PROFIT AND LOSS ACCOUNT VARIOUS EXPENSES LIKE INSTALLATION AND CABLE EXPENSES, MOBILE SALES EXPEN SES, CV EXPENSES, REPAIR EXPENSES AND RETRIEVAL EXPENSES. THE AO ASK ED THE ASSESSEE TO PRODUCE THE PERSONS WHO HAD PERFORMED VARIOUS WORKS FOR THE ASSESSEE. AO NOTED THAT ASSESSEE PRODUCED ONLY ONE PERSON, SR I SANJAY SHAH BUT DID NOT PRODUCE OTHER PERSONS TO WHOM SHE HAD STATE D TO HAVE PAID THE VARIOUS EXPENSES. AO ALSO NOTED THAT ASSESSEE HAD FAILED TO SUBMIT DETAILS REGARDING THE WORK DONE BY THOSE PERSONS, T HE NATURE OF WORK AND THE PAYMENT DETAILS. HE ALSO CONCLUDED THAT ASSESS EE HAD FAILED TO PRODUCE THE QUANTITATIVE DETAILS, THE RATE OF PAYME NT AND AGREEMENT BETWEEN THE ASSESSEE AND THE RESPECTIVE PERSON TO S UBSTANTIATE THE CLAIM REGARDING DEDUCTION. HE THEREFORE CONCLUDED THAT T HE TOTAL EXPENDITURE OF RS. 27,81,277/- IS UNVERIFIABLE. HE THEREAFTER DISA LLOWED 20% OF THE TOTAL EXPENSES AND THUS MADE DISALLOWANCE OF RS. 5,56,255 /-. AO ALSO NOTICED THAT ASSESSEE HAD INCURRED VARIOUS ADMINISTRATIVE E XPENSES LIKE FAX, COURIER, POSTAGE, OFFICE EXPENSES ETC. ASSESSEE WAS ASKED TO PRODUCE SUPPORTING DETAILS FOR THE VOUCHERS RELATED TO THE EXPENSES. AO NOTED THAT ASSSESSEE FURNISHED ONLY COMPUTER GENERATED VOUCHER S FOR ALL THE EXPENSES AND DID NOT SUBMIT ANY BILLS OR SUPPORTING EVIDENCE TO SUBSTANTIATE THE CLAIM. IN THE ABSENCE OF SUPPORTIN G DOCUMENTARY EVIDENCE, HE CONCLUDED THAT THE ADMINISTRATIVE EXPE NSES OF RS. 5,56,255/- I.T.A NO. 1721/AHD/2010 A.Y. 2006-07 PAGE NO ITO VS. SMT. INDIRA RAKESH NAHATA 6 REMAINS UNVERIFIABLE AND ACCORDINGLY DISALLOWED 20% OF THE ADMINISTRATIVE EXPENSES AND THUS WORKED OUT THE DISALLOWANCE OF RS . 1,01,381/-. 9. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED T HE MATTER BEFORE LD. CIT(A). LD. CIT(A) AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE RESTRICTED THE DISALLOWANCE TO 10% INSTEAD OF 20% M ADE BY THE AO BY HOLDING AS UNDER:- 10 . I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS. I FIND THAT THE AO MADE THE DISALLOWANCE ONLY BECAUSE THE ASSESSEE WAS UNAB LE TO SUBSTANTIATE SUCH EXPENSES, WITH BOOKS OF ACCOUNT AND BILLS AND VOUCHERS. HOWEVER, THE EXPENSES SUCH AS INSTALLATION & CABLING EXPENSE S, MOBILE SALE EXPENSES, CV EXPENSES, REPAIR EXPENSES, RETRIEVAL E XPENSES, WERE DIRECTLY RELATABLE TO THE ASSESSEE'S BUSINESS. THE ASSESSEE IS AN EXCLUSIVE SERVICE PROVIDER FOR TATA TELE SERVICES L TD. IN SUCH CASES, MOST OF THE EXPENSES ARE BORNE BY THE CONCERNED COMPANIE S THEMSELVES. THOUGH IT MAY HAVE BEEN A PART OF THE ASSESSEE'S BU SINESS TO INCUR SUCH EXPENSES YET, SUCH EXPENSES COULD NOT HAVE BEEN INC URRED IN AN ADHOC AND ARBITRARY MANNER. THERE OUGHT TO HAVE BEEN A BA SIS FOR SUCH EXPENSES. 10.1 THE EXPENSES WERE NOT FULLY VERIFIABLE EVEN THOUGH THE PETTY CASH BOOK WAS PRODUCED IN THE FORM OF COMPUTER PRINT-OUT S. ALL THE EXPENSES ENTERED IN THE PETTY CASH BOOK WERE NOT FULLY VERIF IABLE. IT THUS APPEARS THAT ALL SUCH EXPENSES WERE CLAIMED BY THE ASSESSEE TO REDUCE THE INCIDENCE OF TAX, GIVEN THE FACT THAT IN SUCH A BUS INESS IF THE SALE ACHIEVED IS SUBSTANTIALLY HIGH, THE INCOME THEREFROM, WITH M INIMUM EXPENSES, IS ALSO SUBSTANTIAL. THE EXPENSES WERE MANIPULATED BY THE ASSESSES TO REDUCE SUCH INCOME SINCE, IN SUCH A BUSINESS, WHERE THE EARNING IS IN THE NATURE OF COMMISSION PAID BY THE MANUFACTURING COMP ANIES ON THE GOODS SOLD AND THE TARGETS ACHIEVED, THERE IS VERY LITTLE SCOPE TO CLAIM ANY EXPENSE. 10.2 THE ASSESSEE HOWEVER WAS ABLE, TO PROVE WITH R EQUISITE DETAILS THE GENUINENESS OF PAYMENTS TO THE TUNE OF RS 6,33,016. HOWEVER, SINCE THE OTHER EXPENSES WERE NOT VERIFIABLE FOR WHATEVER REA SONS, THERE WAS A CASE FOR MAKING SOME DISALLOWANCE. THEREFORE, I AM OF TH E VIEW THAT IT WOULD MEET THE ENDS OF JUSTICE IF THE DISALLOWANCE IS RED UCED TO ONLY 10% I.E. TO A SUM OF RS.2,78,127 (10% OF RS. 27, 81,277). ASSES SEE WOULD THUS GET A RELIEF OF AN EQUIVALENT AMOUNT. 10.3 AS REGARDS THE ADMINISTRATIVE EXPENSES, I AM OF THE VIEW THAT THE CONVEYANCE EXPANSES, COURIER & POSTAGE EXPENSES, OF FICE EXPENSES, TOOLS EXPENSES, STAFF WELFARE, TRANSPORT AND CARTIN G EXPENSES, COMPUTER & I.T.A NO. 1721/AHD/2010 A.Y. 2006-07 PAGE NO ITO VS. SMT. INDIRA RAKESH NAHATA 7 ELECTRIC MAINTENANCE EXPENSES, PRINTING AND STATION ARY EXPENSES ARE SOLELY INCURRED FOR THE ASSESSEE'S BUSINESS PURPOSE S. FROM THE NATURE OF THE EXPENSES AS DESCRIBED BY THE ARS , IT IS QUITE EVIDENT THAT THE EXPENSES COMPRISED OF VERY SMALL ITEMS. THE PAYEES OR THE RECIPIENTS WERE ORDINARY STAFF /LABOURERS WHO WOULD NOT HAVE B EEN IN A POSITION TO EITHER RAISE ANY BILL OR ISSUE ANY RECEIPT. BEING I LLITERATE, THEY WOULD NOT ALSO HAVE HAD ANY BANK ACCOUNT. UNDER SUCH CIRCUMST ANCES, ANY BUSINESS PERSON WOULD NOT HAVE ANY OTHER OPTION BUT TO FIRSTLY, MAKE THE PAYMENTS IN CASH R AND SECONDLY, PREPARE SELF-MADE VOUCHERS TO ACCOUN T FOR SUCH PAYMENTS. THEREFORE, I AM OF THE VIEW THAT IT WOULD BE UNJUST AND UNFAIR IF ANY DISALLOWANCE IS MADE OUT OF SUCH EXPE NSES ON THE SOLE GROUND THAT THE VOUCHERS WERE INCOMPLETE AND UNVERI FIABLE. THE AO IS DIRECTED TO DELETE THE 20% DISALLOWANCE OUT OF SUCH EXPENSES. 10.4 AS REGARDS VEHICLE EXPENSES, I AM OF THE VI EW THAT HOWEVER MUCH IT IS CLAIMED THAT ASSETS SUCH AS TELEPHONE(S) AND VEH ICLE(S) ARE PROCURED/PURCHASED AND, UTILISED WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF THE ASSESSEE'S BUSINESS, YET THE PERSONAL USE OF SUCH ASSETS BY THE PROPRIETOR/PARTNERS AND EVEN THEIR FAMILY MEMBERS CANNOT BE ENTIRELY RULED OUT, ESPECIALLY WHEN NO RECORD OF TH EIR USAGE IS MAINTAINED. THE DISALLOWANCE OUT OF SUCH EXPENSES WAS TOTALLY J USTIFIED. HOWEVER, SINCE THE AO PROPOSED TO DISALLOW ONLY 10% AND ENDE D UP IN DISALLOWING 20% OF THE EXPENSES, THE AO DISALLOWANCE OUT OF VEH ICLE EXPENSES SHOULD BE LIMITED TO 10%. THE AO IS DIRECTED TO TAKE ACTIO N ACCORDINGLY. 10. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE I S NOW IN APPEAL BEFORE US. BEFORE US LD. DR SUPPORTED THE ORDER O F LD. AO. ON THE OTHER HAND, LD. AR REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD. CIT(A) AND THUS SUPPORTED THE ORDER OF LD. CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. LD. CIT(A) WHILE GRANTING THE RELIEF TO THE ASSESSEE HAD NOTED THAT THE EXPENSES INCURRED BY THE ASSESSE E WERE DIRECTLY RELATABLE TO HER BUSINESS. HE ALSO HELD THAT ALL T HE EXPENSES WERE ENTERED IN THE PETTY CASH BOOK BUT WERE NOT FULLY VERIFIABL E. HE THEREFORE CONSIDERING THE FACTS, REDUCED THE DISALLOWANCE TO 10% IN CASE OF NON- VERIFIABLE EXPENSES. WITH RESPECT TO ADMINISTRATIV E EXPENSES CONSIDERING THE NATURE OF EXPENSES BEING VERY SMALL ITEMS AND T HE PAYEES AND I.T.A NO. 1721/AHD/2010 A.Y. 2006-07 PAGE NO ITO VS. SMT. INDIRA RAKESH NAHATA 8 RECIPIENT TO BE ORDINARY STAFFS/LABOURS WHO WOULD N OT HAVE BEEN IN A POSITION TO EITHER ISSUE BILL OR RECEIPT, HE DELETE D THE 20% DISALLOWANCE OF SUCH EXPENSES. WITH RESPECT TO VEHICLE EXPENSES, HE RESTRICTED THE DISALLOWANCE AT 10%. BEFORE US REVENUE HAS NOT BRO UGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF LD. CIT(A). W E THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AN D THUS THIS GROUND IS DISMISSED. GROUND NO.3 WITH RESPECT TO DELETION ON ACCOUNT OF UNDISCLOSED RECEIPTS. 12. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON PERUSAL OF THE TDS CERTIFICATES ISSUED BY THE TATA TELE SERVICES, AO NOTICED THAT AS PER THE TDS CERTIFICATES THE AMOUNT SHOWN TO HAVE BEEN PAID TO ASSESSEE WAS RS. 60,97,835/- BUT IN THE PROFIT AND LOSS ACCOUNT ASSESSEE HAD SHOWN BUSINESS RECEIPTS OF RS. 53,15,437/-. HE THEREFORE ASKED THE ASSESSEE TO RE-CONCILE THE DIFFERENCE OF RS. 7,82,398/-. IN TH E ABSENCE OF ANY RE- CONCILIATION OR CLARIFICATION, AO ADDED THE DIFFERE NCE AMOUNT OF RS. 7,82,398/- AS THE INCOME OF THE ASSESSEE. 13. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A). LD. CIT(A) AFTER CONSIDERING THE SUBMI SSION OF THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER:- 18. FROM THE FACTS OF THE ISSUE AT STAKE, AS THEY HAVE EMERGED FROM THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER, AND THE SUBMISSIONS OF THE ARS, IT IS CLEAR THAT THE BASIC PREMISE OF THE AO WHILE MAKING THE ADDITION WAS THAT, THE INCOME OF RS 7,82,398 HAD NO T BEEN DISCLOSED DURING THE YEAR. IT IS AN ABSOLUTELY ERRONEOUS OBSE RVATION. IT IS AN ESTABLISHED FACT THAT THE QUANTUM OF PAYMENT(S) SHO WN IN TDS CERTIFICATES FOR A PARTICULAR YEAR BY A PAYER WILL NEVER FULLY C ORRESPOND OR MATCH WITH THE RECEIPTS SHOWN BY THE PAYEE IN THAT PARTICULAR YEAR. THIS IS BECAUSE, THE PAYEE ACCOUNTS FOR THE RECEIPTS ON MERCANTILE B ASIS, AS SOON AS HE/SHE RAISES THE BILL. AND THERE MAY BE SEVERAL BI LLS RAISED DURING THE COURSE OF A SINGLE YEAR, DEPENDING UPON THE NATURE OF BUSINESS AND I.T.A NO. 1721/AHD/2010 A.Y. 2006-07 PAGE NO ITO VS. SMT. INDIRA RAKESH NAHATA 9 TRANSACTIONS. THE PAYER, ESPECIALLY IF IT IS A BIG CORPORATION OR PSU , IN THIS CASE IT WAS TATA TELE SERVICES LTD., TAKES SEVERAL MONTHS TO MAKE THE PAYMENTS, AFTER THE PAYMENT HAS GONE THROUGH SEVERA L CHECKS AND BALANCES. AFTERTIMES, THE PAYMENT IS MADE IN THE NE XT FINANCIAL YEAR, AND THE TAX IS DEDUCTED ONLY WHEN THE PAYMENT IS MADE. THEREFORE, WE HAVE A SITUATION WHERE THE PAYEE HAS ACCOUNTED FOR THE REC EIPT BUT HAS NOT RECEIVED THE PAYMENT DURING THE YEAR. IN THE NEXT YEAR THE DEDUCTOR HAS DEDUCTED THE TAX AT SOURCE WHILE MAKING THE PAYMENT WHICH HAS ALREADY BEEN ACCOUNTED FOR AND DISCLOSED BY THE DEDUCTOR IN THE PRECEDING YEAR. THEREFORE, IT IS ABSOLUTELY UNFAIR FOR ANY ASSESSIN G OFFICER TO MAKE AN ADDITION ON THE BASIS OF DISCREPANCIES BETWEEN TDS CERTIFICATES WITH THE RECEIPTS ACCOUNTED FOR IN THE BOOKS, UNLESS THE TDS CERTIFICATES ARE FORDGED OR THE PAYEE IS STUPID ENOUGH NOT TO DISCLO SE THE CORRECT RECEIPTS. IT MUST ALSO BE APPRECIATED THAT THE ASSESSEE DID B USINESS WITH REPUTED COMPANY I.E. TATA TELE SERVICES LTD. WHO MAKE PAYME NTS ONLY THROUGH ACCOUNT-PAYEE CHEQUES , SO THAT THERE IS NO SCOPE FOR CONCEALING ANY RECEIPT. ON THE OTHER HAND, THE AO DID NOT RAISE TH IS ISSUE DURING THE ASSESSMENT PROCEEDINGS, AND HENCE, GAVE NO SCOPE TO THE ASSESSEE TO RECONCILE THE DIFFERENCE. THEREFORE, NO DISALLOWANC E COULD BE MADE ON THE GROUND THAT THE DIFFERENCE OF RS 7,82,393 WAS NOT V ERIFIABLE. GIVEN SUCH FACTS, I HAVE NO OTHER OPTION BUT TO DIRECT THE AO TO DELETE THE ADDITION OF RS 7,82,398. 14. AGGRIEVED BY THE ORDER OF LD. CIT(A), LD. CIT(A ) REVENUE IS NOW IN APPEAL BEFORE US. BEFORE US LD. DR SUBMITTED THAT ASSESSEE DID NOT PRODUCE ANY RECONCILIATION OF THE DIFFERENCE IN AMO UNTS AS APPEARING IN THE TDS CERTIFICATE AND IN THE PROFIT AND LOSS ACCOUNT AND THEREFORE THE AO WAS FULLY JUSTIFIED IN MAKING THE ADDITIONS. HE TH US SUPPORTED THE ORDER OF AO. LD. AR ON THE OTHER HAND REITERATED THE SUBMIS SIONS MADE BEFORE AO AND LD. CIT(A). HE FURTHER POINTED TO THE RE-CONCI LIATION OF RECEIPTS AS PER TDS CERTIFICATES VIS--VIS BUSINESS RECEIPTS AS REF LECTED IN THE PROFIT AND LOSS ACCOUNT, THE COPY OF WHICH WAS PLACED AT PAGE NO. 10 OF THE PAPER BOOK. HE THEREFORE SUBMITTED THAT LD. CIT(A) AFTER CONSIDERING THE RECONCILIATION HAS DELETED THE ADDITION. HE THUS S UPPORTED THE ORDER OF LD. CIT(A). 15. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE GRANTING REL IEF TO THE ASSESSEE HAS I.T.A NO. 1721/AHD/2010 A.Y. 2006-07 PAGE NO ITO VS. SMT. INDIRA RAKESH NAHATA 10 NOTED THAT ASSESSEE WAS RECEIVING THE PAYMENTS ONLY THROUGH ACCOUNT PAYEE CHEQUES AS IT DID BUSINESS WITH REPUTED COMPA NY I.E. TATA TELE SERVICES. BEFORE US, LD. AR HAS SUBMITTED THE COPY OF RECONCILIATION STATEMENT. ON PERUSAL OF THE RECONCILIATION, IT IS SEEN THAT THE FIGURES STATED IN THE TDS CERTIFICATES ARE RE-CONCILIATED W ITH THE BUSINESS RECEIPTS AS SHOWN IN THE PROFIT AND LOSS ACCOUNT. BEFORE US REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD TO CONTROVERT THE FIN DINGS OF LD. CIT(A) NOR COULD POINT ANY DISCREPANCY IN THE RE-CONCILIATION STATEMENT SUBMITTED BY THE ASSESSEE. IN VIEW OF THESE FACTS, WE FIND NO R EASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). THUS THIS GROUND OF REVEN UE IS DISMISSED. 16. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (G.C. GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD : DATED 12/09/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,