ACIT, New Delhi V. Sh. Ashish Sharma, New Delhi

ITA 1803/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91132 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 01-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

DELHI BENCH A : NEW DELHI BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 1803 /DEL/2013 ASST. YEAR 2009 - 2010 ACIT CIRCLE - 26(1), NEW DELHI VS. ASHISH SHARMA, R - 1/21, VIJAY VIHAR, MANGAL BAZAAR ROAD, UTTAM NAGAR NEW DELHI PAN NO - BDIPS7521J (APPELLANT) (RESPONDENT) DATE OF HEARING 23.04.2015 DATE OF PRONOUNCEMENT 05 . 06 .2015 O R D E R PER A. T. VARKEY, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 31.1.2013 PASSED BY THE LD. CIT(A) - XXIV, NEW DELHI PERTAINING TO ASSESSMENT YEAR 200 9 - 10 . 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL: - ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN LAW, THE CIT(A) HAS ERRED IN 1. DELETING THE ADDITION MADE ON PAYMENTS OF SALARY, COMMISSION PAYMENT, CONSULTANCY CHARGES AND AUDIT FEE WITHOUT DEDUCTING O F TDS TOTALING TO RS. 65,12,896/ - . 2. DELETING THE ADDITION MADE ON AUTO LOAN AND PERSONAL LOAN AS PER PROVISIONS OF SUB CLAUSE (III) OF SUB - SECTION 1 OF SECTION 36 OF THE I.T. ACT TOTALING TO RS. 81,015/ - . 3. DELETING THE ADDITION MADE ON VEHICLE MAINTE NANCE, DEPRECIATION AND TRAVELLING TOTALING TO RS. 6,28,400/ - . 4. THE APPELLANT CRAVES THE RIGHT TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL. APPELLANT BY : SH. T. V ASANTAN SR. DR RESPONDENT BY : SH HAMANT BAJAJ CA ITA NO. 1803/ DEL/ 2013 2 3. GROUND NO.1 RELATE S TO DELETION OF ADDITION MADE ON PAYMENTS OF SALARY, COMMISSION PAYMENT, CONSULTANCY CHARGES AND AUDIT FEE WITHOUT DEDUCTING OF TDS TOTALING TO RS. 65,12,896/ - . 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE A SSESSEE FILED ITS RETURN OF INCOME ON 31.10.2009 DECLARING TAXABLE INC OME OF RS. 30,88,110/ - . THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS. THE ASSESSEE IS A FRANCHISEE OF M/S INDIA INFOLINE LTD. HE IS ENGAGED IN THE BUSINESS OF SHARE TRADING AND EARNS COMMISSION FOR THE BUSINESS PROVIDED TO THE COMPANY . THE ASSESSEE HA S DECLARED INCOM E FROM BUSINESS AND PROFESSION AT RS. 31,21,607/ - AND INTEREST INCOME OF RS. 1506/ - UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S. 143(3) VIDE HIS ORDER DATED 21.12.2011 ON TOTAL INCOME OF RS. 1,03,45,420/ - BY MAKING VARIOUS ADDITIONS. 5 . AGAINST THE AFORESAID ORDER OF THE ASSESSING OFFICER ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS ORDER DATED 31 . 1 .2013 HAS ALLOWED THE APPEAL OF THE ASSESSEE. 6 . AGGRIEVED BY THE ORDER OF TH E LD. CIT(A), NO W THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7 . LD. DR RELIED UPON THE ORDER OF THE AO AND REITERATED THE CONTENTION RAISED IN THE GROUNDS OF APPEAL RAISED BY THE REVENUE AND STATED THAT T HE ASSESSEE IS HAVING GROSS RECEIPTS FROM BUSINESS AND PROFESSION AT RS. 1,10,12,706/ - WHICH IS MORE THAN THE MONETARY LIMITS LAID DOWN IN SEC - 44AB AND HENCE L IABLE TO GET HIS ACCOUNTS AUDITED. AS THE ASSESSEE IS COVERED UNDER THE PROVISIONS OF SECTION 44AB, THE ASSESSE E IS LIABLE TO DEDUCT TAX AT SOURCE U/S 192, 194H AND 194J IN THE RESPECT OF PAYMENTS MADE ON ACCOUNT OF COMMISSION AMOUNTING TO RS. 34,00,000/ - ON ACCOUNT OF CONSULTANCY CHARGE AMOUNTING TO RS. 277,411/ - AUDIT FEES OF RS. 11,030/ - AND STAFF SALARY OF RS. 28,24,455/ - BUT HE FAILED TO ABIDE BY THE PROVISIONS OF ABOVE SECTIONS. LD. DR FURTHER STATED THAT A S PER THE PROVISIONS OF SECTION 44AB, 192, 194H, 194J AND SECTION 40(A) (IA), THE AMOUNT OF RS. 34,00,000/ - RS.2,77,411/ - RS. 11,030/ - AND RS. 28,24,455/ - B EING THE EXPENDITURES DEBITED IN THE P& L ACCOUNT UNDER THE HEAD COMMISSION PAID CONSULTANCY CHARGES AUDIT ITA NO. 1803/ DEL/ 2013 3 FEES AND STAFF SALARY WERE THEREFORE RIGHTLY DISALLOWED BY THE AO AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE UNDER SECTION 40(A) ( IA). HOWEVER THE LD CIT(A), HAS ERRED IN DELETING THE SAID ADDITION, SO THE LD DR WANTS US TO REVERSE THE DECISION . 8 . ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE HAS RELIED UPON THE ORDER OF THE LD. CIT(A) AND DEFENDED THE SAME BY CONTENDING THAT THE AO HAS NOT AT ALL CONTESTED THE GENUINENESS OF TRANSACTION BUT DISALLOWED THE EXPENSE ON ACCOUNT OF NON - DEDUCTION OF TAX AT SOURCE. FURTHER IT WAS THE CONTENTION OF THE LD. AR THAT THE AO HAS FA ILED TO APPRECIATE THE FACT THAT THE ASSESSEE HAS GOT HIS A CCOUNTS AUDITED U/S. 44AB FOR THE FIRST TIME DURING THE YEAR UNDER CONSIDERATION AND ACCORDINGLY THE PROVISIONS OF CHAPTER XVII - B AND SECTION 194H ARE NOT APPLICABLE IN HIS CASE SINCE THIS IS THE FIRST YEAR OF AUDIT AND THE TOTAL TURNOVER OF THE ASSESSEE D ID NOT EXCEED THE LIMITS SPECIFIED U/S . 44AB OF THE ACT DURING THE PRECEDING FINANCIAL YEAR, NOTICING THESE FACTS AND LAW THE LD CIT(A) HAS RIGHTLY DELETED THE ADDITION, SO HE DOES NOT WANT US TO INTERFERE IN THE SAME. 9 . WE HAVE HEARD BOTH THE PARTI ES AND PERUSED THE RECORDS. WITH REGARD TO GROUND NO. 1 REGARDING DELETION OF ADDITION MADE ON PAYMENTS OF SALARY, COMMISSION PAYMENT, CONSULTANCY CHARGES AND AUDIT FEE WITHOUT DEDUCTION OF TDS TOTALING TO RS. 65,12,896/ - IS CONCERNED , F IRST WE WILL TAKE UP THE COMMISSION/ CONSULTANCY CHARGE PAID OF RS.34,00,000/ - WHICH WAS DISALLOWED BY AO. WE FIND THAT ASSESSEE IS A PROPRIETARY CONCERN AND IS A FRANCHISE (ACTING AS SUB - BROKER) OF M/S INDI A INFOLINE LTD. ENGAGED IN THE BUSINESS OF SHARE TRAD ING AND EARNS COMMISSION INCOME FOR THE BUSINESS PROVIDED TO IT BY FRANCHISER I.E. M/ S INDIA INFOLINE LTD. HIS INCOME IS BASED ON THE PERCENTAGE OF THE QUANTUM/ AMOUNT OF TRANSACTIONS UNDERTAKEN BY HIM ON BEHALF OF HIS CLIENTS. THE ASSESSEE GIVES COMMISS ION TO HIS STAFF OR ANY PERSONNEL THROUGH WHOSE RECOMMENDATION THE ASSESSEE RECEIVES CLIENTS (AND IN TURN BUSINESS); THIS IS A GENERAL WORKING STRATEGY ADOPTED BY HIM TO EXPAND HIS BUSINESS. FOR NON D E D U CTION OF TDS, THE AO HAS DISALLOWED THE PAYMENTS INCU RRED BY THE ASSESSEE. ITA NO. 1803/ DEL/ 2013 4 9.1 WE TAKE NOTE THAT THE AO HAS NOT AT ALL CONTESTED THE GENUINENESS OF TRANSACTION BUT DISALLOWED THE EXPENSE ON ACCOUNT OF NON - DEDUCTION OF TAX AT SOURCE. FURTHER IT WAS THE C ONTENTION OF THE LD. AR THAT THE AO HAS FA ILED TO APPRECIATE THE FACT THAT THE ASSESSEE HAS GOT HIS ACCOUNTS AUDITED U/S. 44AB FOR THE FIRST TIME DURING THE YEAR UNDER CONSIDERATION AND ACCORDINGLY THE PROVISIONS OF CHAPTER XVII - B AND SECTION 194H ARE NOT APPLICABLE IN HIS CASE SINCE THIS IS THE FIRST YEA R OF AUDIT AND THE TOTAL TURNOVER OF THE ASSESSEE DID NOT EXCEED THE LIMITS SPECIFIED U/S 44AB OF THE ACT DURING THE PRECEDING FINANCIAL YEAR . 9.2 THE TDS PROVISIONS IN RESPECT TO COMMISSION, CONSULTANCY FEES ARE GOVERNED BY & AUDIT FEES ARE GOVERNED BY SEC. 194H & 194J . WE TAKE NOTE THAT THE AO HAS BASED THE DISALLOWANCES QUOTING PROVISO TO SEC. 194H & 194 . T HE SAID PROVISO READS AS BELOW: - 'PROVIDED THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCI AL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH COMMISSION OR BROKERAGE IS CREDITED OR PAID, SHALL BE LIABLE TO DEDUCT INCOME TAX UNDER THIS SECTION.. 9.3 A BARE READING OF THE AFORESAID PROVISO STATES THAT THE LIABILITY TO DEDUCT TAX AR ISES ONLY IN CASE THE TURNOVER OR GROSS RECEIPTS OF THE INDIVIDUAL EXCEEDS THE MONETARY LIMITS SPECIFIED U/S 44AB DURING THE PRECEDING FINANCIAL YEAR. 9.4 A PERUSAL OF THE COPY OF ITR ACKNOWLEDGEMENT AND PROFIT & LOSS ACCOUNT FOR THE PRECEDING YEAR FROM WHEREIN WE NOTE THAT THE TOTAL CREDITS IN THE PRECEDING YEAR ARE NOT SURPASSING EVEN RS 15 LACS. WE FIND THAT THE AO HAS FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE HAS GOT HIS ACCOUNTS AUDITED U/S. 44AB OF THE ACT FOR TH E FIRST TIME DURING THE YEAR UNDER CONSIDERATION AND ACCORDINGLY THE PROVISIONS OF CHAPTER XVII B ARE NOT APPLICABLE IN HIS CASE IN RESPECT TO SEC T ION 194 H, SINCE THIS IS THE FIRST YEAR OF AUDIT AND THE TOTAL TURNOVER OF THE ASSESSEE DID NOT EXCEED THE LIM ITS SPECIFIED U/S. 44AB OF THE ACT, DURING THE PRECEDING FINANCIAL YEAR. WE FIND ITA NO. 1803/ DEL/ 2013 5 THAT THE LD. CIT(A) HAS RIGHTLY HELD T HAT IN THE CASE OF AN INDIVIDUAL OR AN HUF, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON B Y HIM EXCEEDS THE MONETARY LIMITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH COMMISSION OR BROKERAGE IS CREDITED OR PAID, SHALL NOT BE LIABLE TO DEDUCT INCOME TA X UNDER THIS SECTION. BOTH SECTION 194H AND 194J HAVE SIMILAR WORDINGS. IT IS THEREFORE, CLEAR THAT AN INDIVIDUAL IS OBLIGED TO DEDUCT TAX AT SOURCE ONLY IN CASE HIS TURNOVER OR RECEIPTS EXCEED THE SPECIFIED LIMIT U / S. 44AB DURING THE FINANCIAL YEAR IMMEDI ATELY PRECEDING THE YEAR UNDER CONSIDERATION. WE CONCUR WITH THE LD. CIT(A) S OBSERVATION THAT S INCE, THIS IS THE FIRST YEAR IN WHI CH THE TURNOVER OF THE ASSESSEE HAS EXCEEDED THE PRESCRIBED LIMITS U/S.44AB, IT IS CLEAR THAT HE WAS NOT OBLIGED TO DEDUCT TDS ON COMM ISSIONS PAID OR CONSULTANCY CHARGES PAID. THEREFORE, HE RIGHTLY DELETED THE ADDITION OF RS.34 LACS ON THIS ACCOUNT. 10. AS REGARDS THE ADDITION OF RS. 2 ,77,411/ - BEING CONSULTANCY CHARGES PAID BY THE ASSESSEE WITHOUT DEDUCTING TDS. ON THE SAME REASONING AS STATE ABOVE , WE FIND THAT THE PROVISIONS OF SECTION 194H ARE NOT APPLICABLE TO THE ASSESSEE IN THIS YEAR, SINCE, HIS TOTAL TURNOVER IN THE PRECEDIN G YEAR HAD NOT EXCEEDED THE PRESCRIBED LIMITS U/S. 44AB. THEREFORE, THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS. 2,77,411/ - ON THIS ACCOUNT. 11. AS REGARDS THE ADDITION OF RS. 11,030/ - BEING AUDIT FEES, ON THE GROUNDS THAT THE PROVISIONS AND MONETARY LIMITS PRESCRIBED U/S. 194J ARE NOT APPLICABLE IN THIS CASE F OR THE CURRENT YEAR UNDER CONSIDERATION. WE FIND THAT THIS AMOUNT IS BELOW THE MONETARY LIMIT SPECIFIED U/S 194J SO THE LD CIT(A) HAS RIGHT LY DELETED AND SO WE CONFIRM THE SAME. 12. AS REGARDS ADDITION OF RS. 28,24,455/ - BEING SALARY PAID WITHOUT DEDUCTION OF TDS , WE TAKE NOTE OF THE SUBMISSION S OF THE AR OF THE ASSESSEE, BEFORE THE LD. CIT(A) THAT THE NATURE OF THE BUSINESS ACTIVITY OF THE ASSESSEE WAS SUCH THAT HE WA S REQUIRED TO HIRE LOW SALARIED FIELD STAFF AND, THEREFORE, NONE OF THE EMPLOYEES CROSSED THE MONETARY LIMITS SPECIFIED U/S 192 OF THE ACT. THE LEARNED A R FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 40(A)(IA) ITA NO. 1803/ DEL/ 2013 6 WERE NOT APPLICABLE TO THE A SSESSEE AS THE DISALLOWANCES MENTIONED THEREIN WERE RESTRICTED FOR NON DEDUCTION OR LATE DEPOSIT. OF TAX WITH REFERENCE TO PAYMENTS OF INTEREST, COMMISSION, RENT, PROFESSIONAL FEES AND PAYMENT OF CONTRACTORS ONLY. ACCORDING TO LD AR, S ALARY IS NOT COVERED U/S 40(A)(IA). WE FIND THAT LD. CIT(A) HAS OBSERVED THAT I T IS NOT THE CASE OF THE AO THAT THE PAYMENT OF SALARIES TO VARIOUS EMPLOYEES MADE BY THE ASSESSEE ARE HIT BY THE PROVISIONS OF SECTION 192, BECAUSE THE PAYMENTS HAVE BEEN MADE BEYOND THE PRESCRIBED LIMITS MENTIO NED THEREIN A ND THE A O FAILED TO BRING ANY EVIDENCE IN THE ASSESSMENT ORDER , ABOUT ANY BREACH OF MONETARY LIMIT PRESCRIBED UNDER SECTION 192 WITHOUT WHICH THE ORDER OF THE A O CANNOT BE SUS TAINED AND LD CIT(A) HAS DELETED THE ADDITION OF RS. 28 , 24,455/ - SIN CE THE PAYMENT OF SALARY IS NOT HIT BY THE PROVISIONS OF SECTION 40(A)(IA). WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD CIT(A) AND SO W E CONFIRM THE ORDER OF THE LD CIT(A). 13. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS, WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) TO DELETE THE AFORESAID ADDITIONS, AMOUNTING TO RS. 65,12,8 9 6/ - WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME . THEREFORE, THE ISSUE INVOLVED IN GROUND NO. 1 FILED BY REVENUE IS DISMISSED , 14. WITH REGARD TO GROUND NO. 2 REGARDING DELETION OF ADDITION MADE ON AUTO LOAN AND PERSONAL LOAN AS PER THE PROVISIONS OF SUB CLAUSE (III) OF SUB - SECTION 1 OF SECTION 36 OF THE ACT TOTALING TO RS. 81,015/ - AND GROUND NO. 3 REGARDING DELETION OF ADDITION MADE ON VEHICLE MAINTENANCE, DEPRECIATION AND TRAVELLING TOTALING TO RS. 6,28,400/ - ARE CONCERNED, WE FIND THAT THE LD. CIT(A) HAS OBSERVED THAT NO BUSINESS IS POSSIBLE WI THOUT EXPENDITURE INCURRED ON TRAVELLING AND EVEN A TRADER OF LOCAL MARKET NEEDS TO INCUR TRAVELLING EXPENSE . W E FIND FORCE IN THE SUBMISSION OF THE AR, THAT T HE ASSESSEE , BEING A FRANCHISEE OF M / S INDIA INFOLINE LTD., HAD TO MEET THE REGIONAL HEADS OF T HE FRANCHISER, FOR REPORTING PURPOSE AS WELL AS FOR VARIOUS BUSINESS MEETINGS, HIS BEING THE FIRST YEAR OF BUSINESS. THE ASSESSEE HAD TO SEEK GUIDANCE AND HELP IN MATTERS RELATED TO SMOOTH FUNCTIONING OF THEIR CENTRALIZED SOFTWARE, ALONG ITA NO. 1803/ DEL/ 2013 7 WITH THE TRAINING OF VARIOUS MODULES, APART FROM ADMINISTRATIVE REPORTING. THEREFORE, IN VIEW OF THE PROVISIONS OF SECTION 37, THESE EXPENSES INCURRED FOR THE PURPOSE OF BUSINESS ACTIV ITY A RE FULLY ALLOWABLE . WE FIND THAT THE ADDITIONS MADE BY THE AO IS PURELY ON ASSUMPTION THAT THE ASSESSEE WOULD BE CARRYING OUT HIS BUSINESS FROM HIS RESIDENCE THROUGH ONLINE COMPUTER TRANSACTIONS, AND THEREFORE, THERE WAS NO REQUIREMENT OF ANY TRAVELLING ETC . ON THE BASIS OF SUSPICION, CONJECT URE AND GUESS WORK THE AO CANNOT MAKE DISALLO WA NCE OF THE EXPENSES CLAIMED BY THE ASSESSEE FOR WHICH IS INCURRED FOR BUSINESS PURPOSE AND SO IT HAS BEEN RIGHTLY DELETED BY THE LD CIT(A) . IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS, WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER OF TH E LD. CIT(A) WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME. THEREFORE, THE ISSUE INVOLVED IN GROUND NO. 2 & 3 RAISED BY THE REVENUE ARE DISMISSED. 1 5 . IN THE RESULT , THE APPEAL OF THE REVENUE STANDS DISMISSED . ORDER PR ONOUNCED IN THE OPEN COURT ON 0 5 /06/ 2015. - S D / - - S D / - (N.K.SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 0 5 / 0 6 / 2015 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI