Manjit Singh Malhi, Delhi V. A.C.I.T.,Circle-2, Asansol

ITA 2070/KOL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9845 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 14-04-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 05-09-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DHRUBAJYOTI ROY
• Keywords: Business income; TDS; Set aside
• Section: 142(1); 194C; 69A; 194A

Judgement Text

1 ITA NO.2070/KOL/2019 AY 2015-16 MANJIT SINGH MALHI , C(SMC) , IN THE INCOME TAX APPELLATE TRIBUNAL A(SMC) BENCH : KOLKATA ().., ) [BEFORE SHRI A. T. VARKEY, JM] ITA NO. 2070/KOL/2019 ASSESSMENT YEAR: 2015-16 MANJIT SINGH MALHI PAN: AHUPM 2456P VS. ACIT, CIR-2, ASANSOL APPELLANT RESPONDENT DATE OF HEARING 30.06.2020 DATE OF PRONOUNCEMENT 03.07.2020 FOR THE APPELLANT SHRI J.M. THARD, ADVOCATE, LD.AR FOR THE RESPONDENT SHRI DHRUBA JYOTI ROY, JCIT, LD. SR.DR ORDER THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), ASANSOL DATED 10-05-2019 FOR THE ASSESSMENT YEAR 2015-16. 2. THE EFFECTIVE GROUND NO. 1, WHICH READS AS UNDE R:- 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WRONG AND UNJUSTIFIED IN TREATING THE IN TEREST FROM FIXED DEPOSITS MADE IN CONNECTION WITH CONTRACT BUSINESS AS INCOME FROM OTHER SOURCES IN PLACE OF INCOME FROM BUSINESS. 3. FACTS PERTAINING TO THIS GROUND ARE THAT THE ASS ESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONTRACTOR AND RETURNED INCOME AT RS. 11,27,0 50/-. HIS CASE WAS SELECTED FOR LIMITED SCRUTINY ASSESSMENT THROUGH CASS BECAUSE THERE WAS MISMATCH (I) IN RESPECT OF SALES TURNOVER (II) MISMATCH ON TAX CREDIT AND (III) MISM ATCH ON CONTRACT RECEIPTS/FEES. AFTER ISSUING NOTICE U/S. 142(1) OF THE INCOME-TAX ACT, 1 961 ( HEREINAFTER REFERRED TO THE ACT IN SHORT), THE AO AFTER PERUSAL OF 26AS DATA NOTED TH AT THE ASSESSEE HAS RECEIVED TOTAL AMOUNT OF RS. 93,46,927 ( RS. 88,00,954/- AS CONTRACT RECE IPT U/S. 194C AND RS. 5,45,973/- AS INTEREST U/S. 194A). HOWEVER, THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN HIS CONTRACT RECEIPT AT RS. 91,65,482/- . SHORTFALL OF (RS.93,46 ,927 RS. 91,65,482)= RS. 2,31,445/-. THE 2 ITA NO.2070/KOL/2019 AY 2015-16 MANJIT SINGH MALHI AO OBSERVED THAT THE ASSESSEE HAS DISCLOSED HIS INT EREST INCOME OF RS. 860/- ONLY AND ALSO CLAIMED A DEDUCTION U/S. 80TTA OF THE ACT. THE AO T AKING NOTE OF THE AFORESAID FACTS WAS OF THE VIEW THAT THE ASSESSEE HAS NOT SHOWN THE INT EREST INCOME OF RS. 5,45,973/- AS HIS INCOME AND THEREFORE, THE ASSESSEE WAS ASKED TO EXP LAIN AS TO WHY THE SAME SHOULD NOT BE TREATED AS UNDISCLOSED INCOME/ADDED TO THE TOTAL IN COME OF THE ASSESSEE. THE ASSESSEE REPLIED THAT HE HAS RECEIVED INTEREST AMOUNT OF RS. 5,45,973/- ON FDRS AND AN AMOUNT OF RS. 54,630/- WAS DEDUCTED AS TDS U/S. 194A OF THE ACT. BEFORE THE AO, THE ASSESSEE EXPLAINED THAT HIS INTEREST WAS PAID BY HIS BANKERS ON DIFFER ENT FDRS, WHICH WERE SOLELY USED FOR BUSINESS PURPOSE (CONTRACT BUSINESS). ACCORDING TO THE ASSESSEE, THESE FDRS ARE HIS BUSINESS ASSET AND HAVE BEEN ALWAYS REFLECTED IN HIS BUSINES S BALANCE SHEET AND THESE FDRS ARE MADE FOR THE PURPOSE OF HIS CONTRACT BUSINESS [ MALHI CO NSTRUCTION]. MOREOVER, THE ASSESSEE SUBMITTED BEFORE THE AO THAT INTEREST EARNED ON THE SE FDRS ARE ALWAYS TREATED AS PART OF HIS BUSINESS INCOME GENERATED FROM BUSINESS ASSET AND A LWAYS CREDITED IN THE P & L ACCOUNT OF HIS PROPRIETORSHIP BUSINESS (MALHI CONSTRUCTION) AN D IN ORDER TO SHOW THAT THE ASSESSEE CONSISTENTLY WAS ADOPTING THIS PRACTICE, HE FILED A UDITED BALANCE SHEET, P & L ACCOUNT FOR THE AY 2013-14, WHEREIN ALSO HE HAS SHOWN THIS INTEREST RECEIPT ON THIS BUSINESS-FDRS AS HIS BUSINESS INCOME (BY CREDITING IN THE P/L ACCOUNT OF HIS BUSINESS). IT WAS ALSO EMPHASIZED AND POINTED OUT THAT THESE FDRS WERE MADE SOLELY FO R THE PURPOSE OF ABOVE CONTRACT BUSINESS BY OFFERING IT AS COLLATERAL SECURITIES T O THE ABOVE BANK AND/OR AS TENDER MONEY I.E E/MONEY, SECURITY DEPOSIT AND SO ON TO DIFFERENT CO NTRACTEES, WHO INSIST ON IT, WITHOUT WHICH, THE ASSESSEE WOULD NOT GOT THE CONTRACT. THU S, IT WAS CONTENDED BY THE ASSESSEE THAT INTEREST EARNED ON THESE FDRS ARE CORRECTLY SHOWN B Y HIM BY INCLUDING AND TREATING IT AS HIS BUSINESS INCOME. HOWEVER, THIS CONTENTION OF THE A SSESSEE WAS NOT ACCEPTED BY THE AO. ACCORDING TO AO, THE ASSESSEE HAS FAILED TO RECONC ILE HOW THE INTEREST INCOME OF RS. 5,45,973/- RECEIVED FROM FDR FOR WHICH TAX WAS DEDU CTED BY THE BANK U/S. 194A OF THE ACT IS REFLECTED IN CONTRACT GROSS RECEIPT OF RS. 91,65 ,482/- WHICH INCLUDES RS.88,00,954/- AS CONTRACT RECEIPT FOR WHICH TAX WAS DEDUCTED U/S. 19 4C OF THE ACT. THE AO NOTED THAT THE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT DURING THE YEAR AND HAS SHOWN HIS BUSINESS INCOME ON ESTIMATED BASIS AT RS.8,87,050/- U/S. 44A D AND RS. 90,000/- U/S. 44AE AND ALSO SHOWN SALARY OF RS. 3,00,000/- FROM A FIRM. THE AO ALSO NOTED THAT THE ASSESSEE HAS SEPARATELY SHOWN S/B INTEREST OF RS.860/-, WHICH WA S SHOWN AS INTEREST INCOME FROM 3 ITA NO.2070/KOL/2019 AY 2015-16 MANJIT SINGH MALHI OTHER SOURCES. ACCORDING TO THE AO, THE ASSESSEE HAD SHOWN HIS IN COME IN THE ITR OF RS. 12,77,910/- (RS. 8,87,050 + RS. 90,000 + RS. 3,00,0 00/-). AND, THE ASSESSEE HAS NOT REFLECTED THE GROSS RECEIPT OF RS. 93,46,927/- INSTEAD HAS SH OWN ONLY RS 91,65,482/-(SHORTFALL OF RS. 2,31,445/-). AND SINCE THE ASSESSEE HAS NOT SHOWN R S. 5,45,973/-, THEREFORE, THE AO TREATED/ADDED THE SAME AS UNDISCLOSED INCOME TO THE TOTAL INCOME OF ASSESSEE U/S. 69A OF THE ACT. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFOR E THE LD. CIT(A), WHO WAS PLEASED TO CONFIRM THE ORDER OF THE AO. AGGRIEVED, THE ASSESSE E IS BEFORE THIS TRIBUNAL. 4. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS. AFORESAID FACTS ARE NOT REPEATED AGAIN FOR THE SAKE OF BREVITY. THE ONLY DI SPUTE IN THIS CASE IS REGARDING CHARACTERIZATION OF NATURE OF RECEIPT OF RS. 5,45,9 73/-. THE FACT IS THAT THE ASSESSEE HAS RECEIVED INTEREST FROM DIFFERENT FDRS. THE AO HAS N OTED THAT THE ASSESSEE RECEIVED RS. 5,45,973/- AS INTEREST FROM FDRS AND TAX WAS DEDUCT ED AT SOURCE U/S. 194A OF THE ACT. ACCORDING TO AO, THE ASSESSEE HAS NOT REFLECTED TH IS AMOUNT OF INTEREST INCOME IN HIS ITR. ACCORDING TO AO, THIS RECEIPT COMES UNDER THE FOLD OF INCOME FROM OTHER SOURCES . HOWEVER, ACCORDING TO ASSESSEE, SINCE THE FDRS ARE SOLELY MADE FOR THE PURPOSE OF DOING HIS BUSINESS AND SINCE THE FDRS ARE OFFERED AS COLL ATERAL SECURITIES TO ABOVE BANK AND/OR AS TENDER MONEY I.E. E/MONEY, SECURITY DEPOSIT AND SO ON TO DIFFERENT CONTRACTEES, THIS INTEREST EARNED SHOULD PARTAKE THE COLOUR OF THE BUSINESS IN COME AND NOT FROM OTHER SOURCES. ACCORDING TO LD. AR FROM THE FACTS EXPLAINED BY THE ASSESSEE IT CAN BE SEEN THAT INTEREST EARNED FROM FDRS ARE IN-EXTRICABLY LINKED WITH BUS INESS/CONTRACT AND SINCE HAVE DIRECT NEXUS WITH THE BUSINESS OF CONTRACT, THEREFORE, SHO ULD BE CHARACTERIZED AS CONTRACT RECEIPT. THE LD. AR OF THE ASSESSEE HAS RELIED ON THE FOLLOW ING CASE LAWS:- CIT -VS- CHINNA NACHIMUTHU CONSTRUCTIONS - 297-ITR- 70 (KARN). CIT -VS- GOVINDA CHOUDHURY & SONS - 203-ITR-881 (SC ). DCIT -VS- BRITANNIA ENGINEERING LTD.- ITA NO.47SLKO 1L2013 DTD.06.04.20 16. DCIT -VS- SRI B. DIWAKAR - ITA NO.761IBANG/ 2009 DTD.31.03.2010. MRS. SAROJ DASSANI -VS- ACIT - ITA NO.S3601DEL/2004 DTD.02.L2.200S. 5. IT IS NOTED THAT THOUGH THE ASSESSEE HAS REPLIED TO THE AO VIDE DATED18-12-2017THE AFORESAID FACTS LIKE THE FDR WAS USED AS SECURITY F OR OBTAINING THE CONTRACT AND WAS 4 ITA NO.2070/KOL/2019 AY 2015-16 MANJIT SINGH MALHI ESSENTIAL CONDITION FOR BAGGING THE CONTRACT, HOWE VER, THE ASSESSEE HAS NOT BOTHERED TO GIVE ANY MATERIAL/EVIDENCE TO SHOW THAT THE INTEREST ACC RUED ON THE FDRS/DEPOSIT WAS INCIDENTAL AND THAT THE MAIN PURPOSE OF FDRS WAS IT WAS A CO NDITION FOR GETTING THE CONTRACT OR TO AVAIL THE BANK GUARANTEE/SECURITY DEPOSIT/ E-MONEY/ TENDER MONEY ETC. IT IS NOTED THAT THE ASSESSEE ONLY MADE THESE CONTENTIONS, BUT FAILED TO PRODUCE ANY MATERIAL TO SUBSTANTIATE HIS CONTENTION THAT THE INTEREST ACCRUED FROM FDR SHOUL D BE TREATED AS INCOME FROM BUSINESS. MOREOVER, IT IS NOTED THAT THERE IS SHORTFALL OF (RS.93,46,927 RS. 91,65,482)= RS. 2,31,445/- BECAUSE EVEN IF THE CONTENTION OF ASSESS EE IS CORRECT, THEN HE SHOULD HAVE SHOWN THE CONTRACT/BUSINESS INCOME AT RS. 88,00,954 + RS. 5,45,973= RS.93,46,127.80, THUS THERE IS A CLEAR SHORTFALL OF RS. 2,31,445/-. THEREFORE, IN THE LIGHT OF AFORESAID DISCUSSION, I SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) AND REMA ND THE MATTER BACK TO THE AO WITH A DIRECTION TO EXAMINE THE MATTER AFRESH REGARDING THE CHARACTERIZATION/NATURE OF RECEIPT IN THE LIGHT OF THE ABOVE MENTIONED CASE LAWS AS WELL AS THE FACTS WHICH THE ASSESSEE BRING TO THE NOTICE OF THE AO. AND IF THE ASSESSEE BRINGS TH E NOTICE OF AO THE TERMS OF CONTRACT ETC AND IS ABLE TO SHOW THAT THE FDRS IN QUESTION WAS ESSENTIAL/NECESSARY FOR OBTAINING THE CONTRACT, THEN THE INTEREST INCOME FROM THESE FDRS TO BE TREATED AS BUSINESS INCOME AND IF THE ASSESSEE FAILS TO DO SO, THEN AO IS AT LIBERTY TO TREAT IT AS INCOME FROM OTHER SOURCES AND ASSESSMENT MAY BE FRAMED IN ACCORDANCE TO LAW. THE ASSESSEE IS AT LIBERTY TO FILE/PRODUCE NECESSARY CONTRACTS/DOCUMENTS/EVIDENCE S AND CASE LAWS, IF SO ADVISED, TO SUBSTANTIATE THAT THE FDR WAS TO SECURE/AVAIL DIREC TLY OR INDIRECTLY THE CONTRACT WORK AS DISCUSSED SUPRA. WITH THE ABOVE OBSERVATION, THE AP PEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER IS PRONOUNCED IN THE OPEN COURT ON 3RD J ULY 2020. SD/- (ABY. T. VARKEY) JUDICIAL MEMBER DATED :, 3RD JULY 2020 5 ITA NO.2070/KOL/2019 AY 2015-16 MANJIT SINGH MALHI **PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT MANJIT SINGH MALHI B-5/37 1 ST FL., SECTOR-5, P.O ROHINI,DELHI-110085. 2 RESPONDENT A CIT-CIR-2, ASANSOL 3. 4. 5. CIT(A)-4, KOLKATA (SENT THROUGH E-MAIL) CIT- , KOLKATA. DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) BY ORDER, / TRUE COPY, ASSISTANT REGISTRAR